Dynamics of oil price shocks and stock market behavior in Pakistan:evidence from the 2007 financial crisis period

Background:The aim of this study is to investigate the effect of the oil price and its volatility on the stock market of Pakistan before and after the 2007 financial crisis period.Methods:The analyses are carried out on daily data for the period from July 31,2000 to July 31,2014.This study uses several econometric techniques for the analyses,namely,the Johansen-Juselius cointegration test,generalized autoregressive conditional heteroskedasticity(GARCH)model,exponential generalized autoregressive conditional heteroskedasticity(EGARCH)model,variance decomposition method,and impulse response function.Results:The results of the cointegration method indicate a significant long-run association between stock market and oil prices in the pre-crisis period.The EGARCH model shows that oil price returns have a significant effect on stock market returns in both sub-periods,while the result for the GARCH model is significant only in the postcrisis period.We find a significant effect of oil price volatility on the stock market in both sub-periods from the GARCH model.Furthermore,the EGARCH model shows an asymmetric effect of oil price volatility on the stock market in the pre-crisis period.Variance decomposition shows that stock market variations are mostly explained by selfinnovation.Moreover,the impulse response function results show that oil price shocks affected the stock market adversely in the pre-crisis period but positively in the postcrisis period.Conclusions:This study suggests that economic policymakers and investors should consider the oil price as an important factor affecting stock market returns.

Do Oil Price Shocks and COVID-19 Lead to Policy Uncertainty?

This study examines the asymmetric effects of the structural oil price shocks and COVID-19 pandemic on four uncertainty indexes.The author used the SVAR approach for the period 31-Dec-2019 to 28-Jun-2020.The results indicate that the effects are asymmetric of oil price shocks.The author also finds that COVID-19 shocks lead to positive responses to the economic policy uncertainty index.In addition,oil prices(their shocks)have a negative impact on the four indicators of uncertainty.Consequently,governments should actively take effective measures to prevent crude oil prices from shocking and maintain stable economic policies.

Brent prices and oil stock behaviors: evidence from Nigerian listed oil stocks

Background:Given the shale oil glut that culminated in the most recent and continuing oil price drop from June 2014 and the global financial crisis of 2008 that triggered a cyclical downturn in oil prices and stock market activity,this study investigates the impact of Brent oil price shocks on oil related stocks in Nigeria.Methods:This study uses a vector autoregressive(VAR)model with the impulse response function and the forecast variance decomposition error.Findings:The empirical evidence reveals that oil price shocks have a negative impact on Nigerian oil and gas company stocks.In theory,this situation should apply to oil importing countries and is therefore uncharacteristic of an oil exporting country like Nigeria.Conclusions:The findings suggest that oil companies operating in Nigeria should diversify their investments to protect their business from single-sector market forces,and can also embrace the advantages of outsourcing some of their operations to specialist providers to increase flexibility and reduce operating costs.Finally,for vertically integrated oil and gas companies,oil price hedging and energy risk management will be beneficial because it will mean that these companies will take a position in the crude oil futures market.This will allow for better cash flow management and flexibility.Originality/value:This study extends the existing literature in two distinct ways.First,it provides,to the best of our knowledge,the first examination of the impact of oil price shocks on stock market activities with a focus on the market returns of oil and gas companies listed in the Nigerian Stock Exchange.Second,this study uses daily data because high frequency data contain more information than lower frequency data does,and lower frequency data average out too much important information.