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Oil Risk and Asset Returns: Evidence from Emerging Markets in the Middle East

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  • Jussi Nikkinen
  • Kashif Saleem
  • Minna Martikainen
  • Mohammed Omran

Abstract

In this paper, we investigate whether oil risk is priced in selected emerging markets of the Middle East region—in particular, oil-producing countries. Given that these countries have maintained fixed exchange rates against the U.S. dollar, we are able to modify the multivariate GARCH framework to include the oil-risk component. The results show that within the framework we adopt, the world market risk and oil risk are priced on all markets under investigation. The oil risk is highly significant in all markets, indicating that oil-risk exposure, to some extent, is nondiversifiable.

Suggested Citation

  • Jussi Nikkinen & Kashif Saleem & Minna Martikainen & Mohammed Omran, 2014. "Oil Risk and Asset Returns: Evidence from Emerging Markets in the Middle East," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 50(S3), pages 169-189.
    • Handle: RePEc:mes:emfitr:v:50:y:2014:i:s3:p:169-189
    DOI: 10.2753/REE1540-496X5003S310
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    Cited by:

    1. Belasen, Ariel R. & Kutan, Ali M. & Belasen, Alan T., 2017. "The impact of unsuccessful pirate attacks on financial markets: Evidence in support of Leeson's reputation-building theory," Economic Modelling, Elsevier, vol. 60(C), pages 344-351.
    2. Wu, Jie & Zhao, Ruizeng & Sun, Jiasen & Zhou, Xuewei, 2023. "Impact of geopolitical risks on oil price fluctuations: Based on GARCH-MIDAS model," Resources Policy, Elsevier, vol. 85(PB).
    3. Zhang, Dayong & Cao, Hong & Dickinson, David G. & Kutan, Ali M., 2016. "Free cash flows and overinvestment: Further evidence from Chinese energy firms," Energy Economics, Elsevier, vol. 58(C), pages 116-124.

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