Contagious Effects Of Oil Prices On Asian Stock Markets’ Behaviour
The main objective of this study is to examine the stock markets’ shock due to the effect of the price of oil in the East Asia Region. Particularly, this study examines if there is stock market interdependence during global oil price shocks (sudden changes) for a sample of five total oil importer...
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| Main Authors: | , , |
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| Format: | E-Article |
| Language: | English |
| Published: |
Universitas Gadjah Mada, Indonesia
2016
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| Subjects: | |
| Online Access: | http://ir.unimas.my/id/eprint/14334/1/CONTAGIOUS%20EFFECTS%20OF%20OIL%20PRICES%20ON%20ASIAN%20%28abstract%29.pdf http://ir.unimas.my/id/eprint/14334/ https://jurnal.ugm.ac.id/jieb/article/view/15275/10253 |
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| Summary: | The main objective of this study is to examine the stock markets’ shock due to the effect of the price
of oil in the East Asia Region. Particularly, this study examines if there is stock market
interdependence during global oil price shocks (sudden changes) for a sample of five total oil
importers (the Philippines, Hong Kong SAR, Taiwan, South Korea, and Japan), four net oil importers
(Indonesia, Singapore, Thailand, and China), and one net oil exporter (Malaysia) between 1999 and
2014. From the result, an oil price change is collectively found to have a small but significant positive
impact on the stock markets, in particular where a sudden decrease in oil prices tends to cause a stock
market downturn and volatility. The world economy’s spending, financial investments in oil futures
and foreign investment by oil rich nations are some underlying motives for inducing this oil-stock
positive relation. The same direction of time-varying conditional correlations is found across East
Asian stock markets during negative oil price shocks. The integration among East Asian stock markets
is inducing the oil shock contagion to be transmitted from direct oil-affected countries (South Korea,
Hong Kong, and Singapore) to non-direct oil affected countries’ (Japan and Taiwan) stock markets. In
spite of a long practiced ASEAN+3 macroeconomics surveillance process and Early Warning System
(EWS) which can be customized for stock markets to prevent or detect the oil risk, hedging against
initial oil-affected stock markets and a stronger influence by the East Asian countries in the global
world of oil and capital investment are strongly suggested. |
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