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Shock and Volatility Transmission Between Oil Prices and Stock Returns: Case of Oil-Importing and Oil-Exporting Countries

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Proceedings of the 2nd Advances in Business Research International Conference

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Abstract

This study examines shock and volatility transmission between oil prices and stock returns in oil-importing and oil-exporting countries, including the USA, China, Saudi Arabia, Malaysia and a Brent oil market. We used daily data starting from January 1, 2004, until December 31, 2014. By using a bivariate vector autoregressive–generalised autoregressive conditional heteroscedasticity (VAR-GARCH) model, the empirical results suggest that there is a unidirectional shock transmission from oil to stock and bidirectional volatility transmission between oil prices and stock returns in the Standard and Poor 500 (S&P 500). Additionally, bidirectional shock and volatility transmission was discovered between oil prices and stock returns in the Tadawul All Share Index (TASI) and FTSE Bursa Malaysia KLCI (FBMKLCI). Nevertheless, there is no evidence found in the Shanghai Stock Exchange (SSE) Composite. The empirical results also suggest that the transmissions appear more often from oil to stock markets.

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Author information

Authors and Affiliations

  1. Faculty of Business Management, Universiti Teknologi MARA, Kota Kinabalu, Sabah, Malaysia

    Nurul Nazurah Atu & Imbarine Bujang

  2. Faculty of Business Management, Universiti Teknologi MARA, Shah Alam, Selangor, Malaysia

    Norlida Jaafar

Authors
  1. Nurul Nazurah Atu
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  2. Imbarine Bujang
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  3. Norlida Jaafar
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Correspondence to Nurul Nazurah Atu .

Editor information

Editors and Affiliations

  1. University Teknologi MARA , Shah Alam, Malaysia

    Fauziah Noordin

  2. Universiti Teknologi MARA , Shah Alam, Malaysia

    Abdul Kadir Othman

  3. Universiti Teknologi MARA , Shah Alam, Selangor, Malaysia

    Erne Suzila Kassim

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Atu, N.N., Bujang, I., Jaafar, N. (2018). Shock and Volatility Transmission Between Oil Prices and Stock Returns: Case of Oil-Importing and Oil-Exporting Countries. In: Noordin, F., Othman, A., Kassim, E. (eds) Proceedings of the 2nd Advances in Business Research International Conference. Springer, Singapore. https://doi.org/10.1007/978-981-10-6053-3_11

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