The Impact of Falling Crude Oil Price on Financial Markets of Advanced East Asian Countries
DOI:
https://doi.org/10.6000/1929-7092.2018.07.02Keywords:
Declining oil price, financial markets, East Asia, advanced economies.Abstract
We analysed the response of the financial markets of advanced East Asian countries to the significant decline in crude oil price which occurred in 2014. We used daily logarithmic returns of the representative exchange rates of national currencies and stock prices from 1 January, 2013 to 31 December, 2015. The empirical findings showed a significant change in both the dynamic correlation of exchange rates and stock prices and the causality relationship between the commodity, foreign exchange and stock markets during the period of declining crude oil price and instability. This paper highlights the response of the financial markets of advanced East Asian economies to a sharp decline in and instability of crude oil price, thereby contributing to the empirical literature and providing guidance for investment portfolio management.References
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https://doi.org/10.1016/0304-4076(86)90063-1
Cheung, Yin-Wong and Lilian, K. Ng. 1996. “A causality-in-variance test and its application to financial markets prices”. Journal of Econometrics 72(1): 33-48.
https://doi.org/10.1016/0304-4076(94)01714-X
Diaz, E. M., Molero, J. C. and P. G. Fernando. 2016. “Oil price volatility and stock returns in the G7 economies”. Energy Economics, Elsevier 54(C): 417-430.
https://doi.org/10.1016/j.eneco.2016.01.002
Dickey A. David and Fuller A. Wayne. 1979. “Distribution of the estimators for autoregressive time series with a unit root”. Journal of the American Statistical Association 74(366): 427-31.
https://doi.org/10.2307/2286348
Dickey A. David and Fuller A. Wayne. 1981. “Likelihood ration statistics for autoregressive time series with a unit root.” Econometrica 49(4): 1057-72.
https://doi.org/10.2307/1912517
Engle F. Robert. 2002. “Dynamic Conditional Correlation: A Simple Class of Multivariate Generalized Autoregressive Conditional Hetroscedasticity Models”. Journal of Business and Economic Statistics 20(3):339-350.
https://doi.org/10.1198/073500102288618487
Hong, Yonmiao. 2001. “A test for volatility spillover with application to exchange rates”. Journal of Econometrics 103(1-2): 183-24.
https://doi.org/10.1016/S0304-4076(01)00043-4
Le, Thai-Ha and Youngho, Chang. 2016. “Dynamics between strategic commodities and financial variables: Evidence from Japan”. Resources Policy, Elsevier 50:1-9.
https://doi.org/10.1016/j.resourpol.2016.08.006
Lu, Yang and Shigeyuki, Hamori, 2013. ""Dynamic Linkages among Foreign Exchange, Stock, and Commodity Markets in Northeast Asian Countries: Effects from Two Recent Crises,"" Journal of Reviews on Global Economics, Lifescience Global 2: 278-290.
Nelson, B. Daniel. 1991. “The conditional heteroskedasticity in asset returns: A new approach”. Econometrica 59(2): 347-70.
https://doi.org/10.2307/2938260
Thenmozhi M. and N. Srinivasan. 2016. “Co-movement of oil price, exchange rate and stock index of major oil importing countries: A wavelet coherence approach”. The Journal of Developing Areas 50: 85-102.
https://doi.org/10.1353/jda.2016.0036
Zhu, Hui-Ming, Li, Rong and Sufang, Li. 2014. “Modelling dynamic dependence between crude oil prices and Asia-Pacific stock market returns”. International Review of Economics & Finance, Elsevier 29: 208-223.
https://doi.org/10.1016/j.iref.2013.05.015
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Published
2018-02-27
How to Cite
Sultonov, M. (2018). The Impact of Falling Crude Oil Price on Financial Markets of Advanced East Asian Countries. Journal of Reviews on Global Economics, 7, 10–20. https://doi.org/10.6000/1929-7092.2018.07.02
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