Vaasan yliopiston opinnäytteet

Laskentatoimen ja rahoituksen yksikkö, 2019

Masud, Md Abdulla Heal

The impact of oil price on the emerging stock markets

Ohjaaja/Valvoja (DI):
Sami Vähämaa
Tutkinto:
Kauppatieteiden maisteri
Pääaine:
Laskentatoimi ja rahoitus
Koulutusohjelma:
Master's Degree Programme in Finance
Tutkielman kieli:
Englanti
Sivumäärä:
60
This study investigates the relationship between international crude oil indices and emerg-ing stock markets. Utilizing a widen adaptation of the GARCH model, namely GARCH-jump, the study confirms that West Texas Intermediate has a significant positive effect on the emerging economies whereas the impact of Brent oil is insignificant. The outcome is implying that a rise in the West Texas Intermediate index will cause an increase in stock return in emerging markets as well. Moreover, the effect is relatively stable during the global financial crisis and stronger in the post-crisis period confirmed by sub-period anal-ysis. Furthermore, the jump effect is significant in the emerging markets for both oil indi-ces, as evidenced by the statistically significant coefficient in GARCH-jump models. Moreover, the study also confirms the presence of time-varying jumps parameter in the stock returns of emerging markets. Besides, the research suggests that there is no asym-metric impact for West Texas Intermediate oil index to the emerging market returns, whereas asymmetric impact is present in the outcome of Brent oil. Thus, this study is providing new knowledge about the linkage of oil price indices and emerging markets with the extended version of the GARCH model, and it could be used for taking a better investment decision and achieving the advantages of portfolio diversification.
Avainsanat:
Brent, WTI, Emerging market, GARCH-jump
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