The impact of oil price volatality on stock price in oil exporting countries

Naser Khiabani¹ Zahra Ahmadvand²

1) Phd in Economics
2) MA in Economic development and planning

IOI Code : XYCH-AEDBF
Publication : 3rd International conference on Management , Economics and Humanities(icmeh.org)
Abstract :
    With the development of global financial markets, discussion of relationship among financial markets, dynamic relationship among performances in these markets and volatility transmission mechanism among these markets more and more has been involved in financial markets attention. A general expression can be stated that since one of the major tasks for financial managers, policymakers and investors is a risk and crisis management that their portfolio is faced with it, these people should try to minimize the risk. One of the risks in financial markets is the risk of volatility and turbulence contagion from another market to their market. In this thesis, we have dealt with the volatility spillovers from oil markets to stock markets of Petroleum Exporting Countries (OPEC and non-OPEC members). Thus, we have used a VAR (2)-GARCH model. The implemented GARCH model has been a BEKK-typed asymmetric multivariate GARCH. Also, in order to better modeling of volatility spillovers from oil markets to stock markets, we ve linked concept of the GARCH-in-mean to the model; briefly, the applied model can be called VAR (2)-ABEKK-in-mean. The studying countries such as Canada, Mexico, Russia, Norway, Saudi Arabia, Iran, UAE, Kuwait and Nigeria are ones which their weekly stock market data have been used to analyze the model. Finally, some results based on volatility spillover of oil shocks on Stock Market shock for all countries were observed. This research results are largely consistent with previous findings that shocks to the stock market which originated from causes other than oil price shocks have a much greater impact on stock market volatility. According to volatility spillover of oil price changes on average outputs of the stocks, there was evidence of spillover just in Saudi Arabia and Norway.

Keywords : oil shocks volatility spillovers multivariate garch model garchm model stock returns