Interplay between oil prices, country risks, and stock returns in the context of global conflict: A PVAR approach

Dong, Qingyuan; Du, Qunyang; Min Du, Anna

Abstract

Employing the panel vector autoregressive (PVAR) modeling, we analyze the interplay among oil prices, country risks, and stock returns across twenty-nine economies from February 2005 to August 2020. We find that, in the short run, rising oil prices temporarily boost stock prices by reducing country risk. However, over longer horizons, reductions in country risk are linked to lower stock returns. Moreover, in the interaction between stock and oil markets we identify the heterogeneity of three forms of country risk: economic, financial, and political, particularly when comparing developed and developing economies. Findings, offering new insights into the linkages between oil and stock markets, especially in the context of increased global conflict context, are of much value for investment strategies and policy formulations aimed at mitigating risk.

Citation

Dong, Q., Du, Q., & Min Du, A. (2024). Interplay between oil prices, country risks, and stock returns in the context of global conflict: A PVAR approach. Research in International Business and Finance, 72(Part B), 102545. https://doi.org/10.1016/j.ribaf.2024.102545

• Journal Article Type: Article
• Acceptance Date: Aug 22, 2024
• Online Publication Date: Aug 27, 2024
• Publication Date: 2024-10
• Deposit Date: Sep 2, 2024
• Publicly Available Date: Sep 2, 2024
• Journal: Research in International Business and Finance
• Print ISSN: 0275-5319
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 72
• Issue: Part B
• Pages: 102545
• DOI: https://doi.org/10.1016/j.ribaf.2024.102545
• Keywords: Oil prices, Country risks, Stock returns, Correlation, Panel vector autoregression model