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Publication Details
AFRICAN RESEARCH NEXUS
SHINING A SPOTLIGHT ON AFRICAN RESEARCH
economics, econometrics and finance
The effects of crude oil shocks on stock market shifts behaviour: A regime switching approach
Energy Economics, Volume 31, No. 5, Year 2009
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Description
In this paper we develop a two regime Markov-switching EGARCH model introduced by Henry [Henry, O., 2009. Regime switching in the relationship between equity returns and short-term interest rates. Journal of Banking and Finance 33, 405-414.] to examine the relationship between crude oil shocks and stock markets. An application to stock markets of UK, France and Japan over the sample period January 1989 to December 2007 illustrates plausible results. We detect two episodes of series behaviour one relative to low mean/high variance regime and the other to high mean/low variance regime. Furthermore, there is evidence that common recessions coincide with the low mean/high variance regime. In addition, we allow both real stock returns and probability of transitions from one regime to another to depend on the net oil price increase variable. The findings show that rises in oil price has a significant role in determining both the volatility of stock returns and the probability of transition across regimes. © 2009 Elsevier B.V. All rights reserved.
Authors & Co-Authors
Aloui, Chaker
Tunisia, Tunis
Faculté Des Sciences Economiques et de Gestion de Tunis
Jammazi, Rania
Tunisia, Tunis
Faculté Des Sciences Economiques et de Gestion de Tunis
Statistics
Citations: 262
Authors: 2
Affiliations: 1
Identifiers
Doi:
10.1016/j.eneco.2009.03.009
ISSN:
01409883