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Impact Of Crude Oil Price Volatility On Indian Stock Market Returns: A Quantile Regression Approach

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  • Zubair Munawwara

Abstract

This paper examines the heterogenous effect of oil price volatility on Indian sectoral stock returns for the period January 2011 to September 2022 using the quantile regression method, which helps us to analyse the impact in bearish, normal, and bullish periods. The results show that total and sectoral stock returns are negatively affected by oil price fluctuations and the negative effect is stronger during the bearish period. In the normal and bullish periods, oil price volatility does not affect stock returns greatly. The interest rate and exchange rate changes have a stronger effect on sectoral returns in the bearish period in the pharmaceutical, healthcare, banking and finance, IT, fast-moving consumer goods (FMCG), and consumer durables sectors. The study shows that the impact of oil price volatility on sectoral returns is less than the impact of interest rate and exchange rate changes. The study also shows that oil price volatility directly impacts market portfolio returns initially, which subsequently spills over to sectoral returns, which implies that sectoral returns are impacted by oil price volatility through an indirect channel.

Suggested Citation

  • Zubair Munawwara, 2024. "Impact Of Crude Oil Price Volatility On Indian Stock Market Returns: A Quantile Regression Approach," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 69(242), pages 93-128, July – Se.
    • Handle: RePEc:beo:journl:v:69:y:2024:i:242:p:93-128
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    More about this item

    Keywords

    oil price volatility; sectoral returns; quantile regression; bearish; bullish;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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