OIL PRICE SHOCKS AND STOCK MARKET VOLATILITIES: EVIDENCE FROM SELECTED SUB-SAHARAN AFRICAN COUNTRIES

Authors

  • Oboh, Victor. U. Monetary Policy Department, Central Bank of Nigeria.
  • Vanni, Eguolo. M. Monetary Policy Department, Central Bank of Nigeria.
  • Bikefe, Grace. G. Monetary Policy Department, Central Bank of Nigeria.
  • Okoronkwo, Chinecherem. D. Monetary Policy Department, Central Bank of Nigeria.
  • Joshua, Adams. N. Monetary Policy Department, Central Bank of Nigeria.
  • Yusuf, Danjuma. S. Monetary Policy Department, Central Bank of Nigeria.

DOI:

https://doi.org/10.58885/ijbe.v08i2.052.ov

Keywords:

Oil price, Stock market volatility, Africa, economic shocks.

Abstract

The paper examined the relationship between oil price shocks and stock market volatilities in Nigeria, Egypt, South Africa, Kenya, Ivory Coast, and Ghana using a structural Vector Autoregressive model. The data used for the study spanned from January 2000 to December 2019. Findings from the study showed homogeneity in the response of stock market volatility to oil shocks for both oil importing and oil exporting countries, with slight variances in the timing of pass-through and speed of adjustment. Supply shocks had no significant impact on stock market volatility in all countries considered. In making stock market-related decisions, investors and even policy makers should consider the source and pass-through mechanism of oil price shock in their specific countries.

References

Abam, F. I., Nwankwojike, B. N., Ohunakin, O. S., &Ojomu, S. A. (2014). Energy resource structure and on-going sustainable development policy in Nigeria: a review. International Journal of Energy and Environmental Engineering, 5(2-3), 102.

Abeng, M. (2016), Analysis of the Effect of Oil Price Shock on Industry Stock Returns in Nigeria, EcoMod2016 9285, EcoMod.

Adaramola, A. O (2012). Oil price shocks and stock market behaviour: The Nigerian experience. Journal of economics, 3(1), 19-24.

Adenekan, A.T. Hilili, M.J & Okereke, A.N. (2020). Oil Price, Exchange Rate and Stock Market performance in Nigeria. Central Bank of Nigeria Economic and Financial Review, 58(4), 63-103.

Al-Fayoumi, N.A. (2009). The Oil Prices and Stock Market Returns in Oil Importing Countries: The Case of Turkey, Tunisia and Jordan.

Algia, H. (2018). The Oil Price Shocks and their Effect on the Stock Market Returns: A structural VAR model. Journal of Economics and Economic Education Research. 19(3), 1-23.

Anyalechi, K. C, Ezeaku, H. C., Onwumere, J, U, J., Okereke, E. J., (2019). Does oil Price Fluctuation Affect Stock Market Returns in Nigeria?. International Journal of Energy Economics and Policy, 9(1), 194-199.

Apergis, N. & Miller, S.M. (2009). Do structural oil shocks affect stock prices? Journal of Energy Economics, 31(4), 569–575.

Arouri, M. E. H., & Rault, C. (2012). Oil Prices and Stock Markets in GCC Countries: Empirical Evidence from Panel Analysis. International Journal of Finance & Economics, 17(3), 242-253.

Arouri, M. E. H., Jouini, J., & Nguyen, D. K. (2011). Volatility Spillovers between Oil Prices and Stock Sector Returns: Implications for Portfolio Management. Journal of International Money and Finance, 30(7), 1387-1405.

Badeeb, R. A. & Lean, H. (2018). Asymmetric Impact of Oil Price on Islamic Sectoral Stocks. Energy Economics, 77, 128-139.

https://doi.org/10.1016/j.eneco.2017.11.012

Bastianin, A., Conti, F., & Manera, M. (2016). The Impacts of Oil Price Shocks on Stock Market Volatility: Evidence from the G7 Countries. Energy Policy, 98, 160-169.

Baumeister, C., Peersman, G., & Van Robays, I. (2010). The Economic Consequences of Oil Shocks: Differences Across Countries and Time. Inflation in an Era of Relative Price Shocks, Reserve Bank of Australia, 91-128.

Bhuiyan, E. M., & Chowdhury, M. (2020). Macroeconomic variables and stock market indices: Asymmetric dynamics in the US and Canada. The Quarterly Review of Economics and Finance, 77, 62-74. https://doi.org/10.1016/j.qref.2019.10.005

Broadstock, D. and Filis, G. (2014). Oil Price Shocks and Stock Market Returns: New Evidence From the United States and China. Journal of International Financial Markets, Institutions and Money 33, 417–433.

Bubbles. Energy Economics, Elsevier, 31(4), 559-568. Case of Turkey, Tunisia and Jordan. European Journal of Economics, Finance and Administrative Sciences, 16, 86-101.

Chan, Y. T., & Qiao, H. (2023). Volatility spillover between oil and stock prices: Structural connectedness based on a multi-sector DSGE model approach with Bayesian estimation. International Review of Economics and Finance, 87, 265-286. https://doi.org/10.1016/j.iref.2023.04.014

Chen, G. J., & Wang, Z. H. (2010). Continuous Volatility and Jump Volatility in China’s Stock Market. Systems Engineering-theory & Practice, 9.

Degiannakis, S., Filis, G., & Kizys, R. (2014). The Effects of Oil Price Shocks on Stock Market Volatility: Evidence from European Data. The Energy Journal, 35(1).

EcoMod No. 9285, EcoMod.Energy Economics, Elsevier, 71(c), 128 – 139.

Energy Firms in Nigeria. Kasetsart Journal of Social Sciences, 1-8.

Engle, R. F., & Rangel, J. G. (2008). The spline-GARCH Model for Low-frequency Volatility and its Global Macroeconomic Causes. The Review of Financial Studies, 21(3), 1187-1222.

Enwereuzoh P. A., Odei-Mensah, J. & Junior, P. O (2021). Crude oil shocks and African stock markets. Research in International Business and Finance, 55, 101346. https://doi.org/10.1016/j.ribaf.2020.101346

Evidence for some OECD Countries. Journals of Applied Economics, 37(2), 201 – 228.

Evidence from oil price volatility index. Energy Strategy Reviews, 44, 101002. https://doi.org/10.1016/j.esr.2022.101002

Gatuhi, S.K., & Macharia, P.I. (2013). Influence of Oil Prices on Stock Market Performance in Kenya.

Ge, Z. (2023). The asymmetric impact of oil price shocks on China's stock market: Evidence from quantile-on-quantile regression. Quarterly Review of Economics and Finance. 89, 120-125. https://doi.org/10.1016/j.qref.2023.03.009

Gourène, G.Z. & Mendy, P. 2018).Oil Prices and African Stock Market Co movement: A time and frequency analysis, Journal of African Trade, 5(1), 55-67. DOI: https://doi.org/10.1016/j.joat.2018.03.002

Güntner, J. H. (2011). How do International Stock Markets Respond to Oil Demand and Supply Shocks? FEMM Working Papers.

Hamilton, J. D. (2013) Historical Oil Shocks. NBER Working Paper, (16790). in Kenya. IJMBS 3(4), 59-65.

Jimenez-Rodriguez, R. & Sanchez, M. (2005). Oil price shocks and real GDP growth: empirical evidence for some OECD countries.

https://doi.org/10.1080/0003684042000281561

Kang, W., Ratti, R. A., and Yoon, K. H. (2015). Return and Volatility Relationship. Journal of International Financial Markets, Institutions and Money, 34, 41–54. https://doi.org/10.1016/j.intfin.2014.11.002

Kelikume, I. and Muritala, O (2019). The Impact of Changes in Oil Price on Stock Market: Evidence from Africa. International Journal of Management, Economics and Social Sciences, 8(3), 169-194.

Khan, M. K., Teng, J. Z., Khan, M. I., & Khan, M. F. (2023). Stock market reaction to macroeconomic variables: An assessment with dynamic autoregressive distributed lag simulations. International Journal of Finance & Economics, 28(3), 2436-2448.

https://doi.org/10.1002/ijfe.2543

Khan, N., Saleem, A. & Ozkan, O. (2023). Do geopolitical oil price risk influence stock market returns and volatility of Pakistan: Evidence from novel non-parametric quantile causality approach. Resources Policy, 81, (103355).

https://doi.org/10.1016/j.resourpol.2023.103355

Kilian, L. (2009). Not all Oil Price Shocks are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market. American Economic Review, 99(3), 1053-69.

Kilian, L., & Park, C. (2009). The Impact of Oil Price Shocks on the US Stock Market. International Economic Review, 50(4), 1267-1287.

Liu, F., Umair, M., & Gao, J. (2023). Assessing oil price volatility co-movement with stock market volatility through quantile regression approach. Resources Policy, 81, 103375. https://doi.org/10.1016/j.resourpol.2023.103375

Liu, F., Xu, J., & Ai, C. (2023). Heterogeneous impacts of oil prices on China's stock market: Based on a new decomposition method. Energy, 268, 126644. https://doi.org/10.1016/j.energy.2023.126644

Liu, X., Wang, Y., Du, W., &Ma, Y. (2022). Economic policy uncertainty, oil price volatility, and stock market return Evidence from a nonlinear model. North American Journal of Economics and Finance, 62, 101777. https://doi.org/10.1016/j.najef.2022.101777

Lu, X., Ma, F., Wang, T. & Wen, F. (2023). International stock market volatility: A data-rich environment based on oil shocks. Journal of Economic Behavior and Organization, 214, 184-215. www.elsevier.com/locate/jebo

Lu, X., Ma, F., Wang, T., & Wen. F. (2023). International stock market volatility: A data-rich environment based on oil shocks. Journal of Economic Behavior and Organization, 214, 184-215. https://doi.org/10.1016/j.jebo.2023.08.005

Markets of Oil-Importing and Oil-Exporting Countries? Economies 2019, 7(3).

Miller, J.I & Roland, R. (2009). Crude oil and stock markets: Stability, instability, and bubbles. https://doi.org/10.1016/j.eneco.2009.01.009

Mokni, K. (2020). Time-varying Effect of Oil Price Shocks on the Stock Market Returns: Evidence from Oil-importing and Oil-exporting Countries. Energy Reports, 6, 605-619.

Odionye, J.C, Ukeje, O. S, Odo, A. C (2019). Oil price shocks and inflation dynamics in Nigeria sensitivity of unit root to structural breaks. International Journal of Business and Economics Research. 8(2), 58-64.

Ojikutu, O. T., Onolemhemhen, R. U., and Isehunwa, S. O. (2017). Crude Oil Price Volatility and its Impact on Nigerian Stock Market Performances (1985–2014). International Journal of Energy Economics and Policy 7(5), 302-311.

Osakwe, C. I., Ogbonna, K. S., & Obi-Nwosu, V. O. (2020). Stock Market Capitalization and Economic Growth of Nigeria and South Africa. European Academic Research, 7, 5605-5623.

Panel ARDL Approach. Economic Modelling, 66, 258-271.

Performance in Nigeria. Economic and Financial Review Volume 58/4, Central Bank of Nigeria.

Salisu, A.A. and Isah, K.O. (2017) Revisiting the Oil Price and Stock Market Nexus: A Nonlinear Panel ARDL approach. Economic Modelling, 66, 258-271. https://doi.org/10.1016/j.econmod.2017.07.010

Shahrestani, P and Rafei, M (2020). The impact of oil price shocks on Tehran Stock Exchange returns: Application of the Markov switching vector autoregressive models. Resource Policy, 65, 101579. https://doi.org/10.1016/j.resourpol.2020.101579

Shahrestani, P. & Rafei, M. (2019). The Impact of Oil price Shocks on Tehran Stock Exchange Shocks?. Univ., Faculty of Economics and Management.

Soyemi, K., Ogebe, J. & Richard, A. (2017). Effects of Oil Price Shock on Stock Returns of energy firms in Nigeria. Kasetsart Journal of Social Sciences, xxx, 1-8. http://dx.doi.org/10.1016/j.kjss.2017.09.004.

Sreenu, N (2022). Impact of crude oil price uncertainty on Indian stock market returns: Time and Frequency Analysis. Journal of African Trade, 5(1/2), 55–67.

Umar, M., Su, C. W., Rizvi, S. K. A., &Lobonţ, O. R. (2021). Driven by fundamentals or exploded by emotions: Detecting bubbles in oil prices. Energy, 231, 120873. https://doi.org/10.1016/j.energy.2021.120873

Vo, M. (2011). Oil and Stock Market Volatility: A Multivariate Stochastic Volatility Perspective. Energy Economics, 33(5), 956-965.

Wang, Y., Wu, C., & Yang, L. (2013). Oil Price Shocks and Stock Market Activities: Evidence from Oil-importing and Oil-exporting Countries. Journal of Comparative Economics, 41(4), 1220-1239.

Wei, Y., & Guo, X. (2017). Oil price shocks and China's stock market. Energy, 140, 185-197.

Wu, X. F., & Chen, G. Q. (2019). Global overview of crude oil use: From source to sink through inter-regional trade. Energy Policy, 128, 476-486. https://doi.org/10.1016/j.enpol.2019.01.022

Youssef, M. & Mokni, K. (2019). Do Crude Oil Prices Drive the Relationship between Stock Markets of Oil-Importing and Oil-Exporting Countries? Economies, 7(70), 1-22. https://doi.org/10.3390/economies7030070

Zamereith, G.A. & Mendy, P. (2018). Oil prices and African Stock Markets Co-movement: A time and frequency analysis. Journal of African Trade. 5(1), 55-67. https://doi.org/10.1016/j.joat.2018.03.002

Downloads

Published

2023-09-05

How to Cite

Oboh, Victor. U., Vanni, Eguolo. M., Bikefe, Grace. G., Okoronkwo, Chinecherem. D., Joshua, Adams. N., & Yusuf, Danjuma. S. (2023). OIL PRICE SHOCKS AND STOCK MARKET VOLATILITIES: EVIDENCE FROM SELECTED SUB-SAHARAN AFRICAN COUNTRIES. International Journal of Business & Economics (IJBE), 8(2), 52–78. https://doi.org/10.58885/ijbe.v08i2.052.ov

Metrics