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Oil price shocks and stock return volatility: New evidence based on volatility impulse response analysis

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  • Eraslan, Sercan
  • Menla Ali, Faek

Abstract

We use volatility impulse response analysis to quantify the size and the persistence of different types of oil price shocks on oil and stock return volatility dynamics. Our results show that precautionary demand followed by aggregate demand-side shocks, compared to supply-side ones, have higher positive and persistent effects on stock return volatility whereas the covariances between the two variables are mostly affected by the former shocks.

Suggested Citation

  • Eraslan, Sercan & Menla Ali, Faek, 2018. "Oil price shocks and stock return volatility: New evidence based on volatility impulse response analysis," Economics Letters, Elsevier, vol. 172(C), pages 59-62.
    • Handle: RePEc:eee:ecolet:v:172:y:2018:i:c:p:59-62
    DOI: 10.1016/j.econlet.2018.08.022
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    References listed on IDEAS

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    Cited by:

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    More about this item

    Keywords

    Oil price shocks; Stock returns; Volatility impulse response analysis;
    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
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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