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Licensed Unlicensed Requires Authentication Published by De Gruyter February 11, 2020

Identifying asymmetric responses of sectoral equities to oil price shocks in a NARDL model

Abderrazak Dhaoui, Julien Chevallier and Feng Ma

Abstract

This study examines the asymmetric responses of sector stock indices returns to positive and negative fluctuations in oil prices using the NARDL model. Our empirical findings support indirect transmissions of oil price fluctuation to the financial market through industrial production and short-term interest rate. Furthermore, both direct and indirect impacts of oil price shocks on stock returns are sector dependent. These results are with substantial policy implications either for investors or for policymakers. They mainly help government authorities to reduce the instability in financial markets caused by the major oil price shocks. The analysis of the impact of oil price shocks on stock markets also helps the financial market participants to adjust their decisions and revise their coverage of energy policy that is substantially affected by the turbulence and uncertainty in the crude oil market. Finally, based on the forecast of the oil price shocks effects, the central bank should adjust the interest rate in order to face up to the inflation rate induced by oil prices since oil prices act as an inflationary factor.

JEL Classification: G11; G12; G1

Appendix

Table 6:

NARDL estimation.

BanksVariablesFinancialsVariablesTelecommunicationsVariablesHealthcareVariablesOil & GasVariablesMaterials
Constant0.0285

(0.1702)
Constant0.2889***

(3.0312)
Constant0.3865***

(6.0515)
Constant1.5521***

(8.9614)
Constant1.0672***

(4.6292)
Constant0.2705***

(4.6383)
SPt−1−0.0088**

(−2.1420)
SPt−1−0.1913***

(−3.5154)
SPt−1−0.7524***

(−8.2559)
SPt−1−0.9014***

(−9.9254)
SPt−1−0.3217***

(−4.5452)
SPt−1−0.2479***

(−4.2413)
IPt1+0.6412***

(4.7362)
IPt1+0.3255***

(2.6443)
IPt1+0.4484***

(3.1628)
IPt1+1.3651***

(3.0214)
IPt1+0.1912**

(2.0282)
IPt1+0.1277

(1.2993)
IPt10.6818***

(3.5438)
IPt1−0.2982**

(−2.1865)
IPt10.2284

(1.4529)
IPt1−0.7367

(−1.3722)
IPt10.0194

(0.1798)
IPt1−0.0265

(−0.2223)
Rt1+−7.4461**

(−2.1368)
Rt1+−4.9879

(−1.2940)
Rt1+15.7111***

(3.8919)
Rt1+−34.7345***

(−3.5217)
Rt1+5.1515*

(1.9343)
Rt1+−3.7617

(−1.1925)
Rt1−4.8486***

(−2.9834)
Rt11.4742

(1.2389)
Rt111.2075***

(6.4980)
Rt11.2120

(0.3723)
Rt12.5326***

(3.0594)
Rt11.4363

(1.6490)
OPt1+−0.0478

(−0.9436)
OPt1+−0.1524***

(−3.1941)
OPt1+0.1958***

(4.2045
OPt1+−0.1917

(−1.3841)
OPt1+0.0523

(1.2227)
OPt1+0.0653*

(1.6894)
OPt1−0.0480**

(−2.2792)
OPt1−0.0781***

(−3.6672)
OPt10.1186***

(5.3221)
OPt1−0.1653***

(−2.6610)
OPt10.1146***

(4.0011)
OPt10.0302**

(2.0891)
ΔSPt−2−0.2155**

(−2.6074)
ΔSPt−40.2096***

(2.6423)
ΔRt1+−34.4163***

(−5.3425)
ΔIP6.5327***

(4.3052)
ΔSPt−10.1531**

(2.2334)
ΔIP1.9824***

(5.9285)
ΔSPt−9−0.1247*

(−1.8131)
ΔSPt−50.2134***

(2.8663)
ΔRt2+−17.5763**

(−2.5879)
ΔIPt43.6084**

(2 .2322)
ΔIP+1.0715***

(3.7044)
ΔIPt10.8981**

(2.5288)
ΔIP+1.3407***

(3.2098)
ΔIP+1.0319***

(3.1042)
ΔRt5+−17.6745**

(−2.3105)
ΔIPt63.3511**

(2.2300)
ΔIP0.7425**

(2.1254)
ΔRt1+−39.0243***

(−8.2055)
ΔIPt7+−1.1531***

(−2.8473)
ΔIPt3+1.0116***

(2.8954)
ΔRt3−8.2504***

(−2.6714)
ΔRt3+39.3318**

(2.0257)
ΔIPt30.9021***

(2.8579)
ΔRt2+12.0466**

(2.2428)
ΔIPt8+−1.6403***

(−4.1943)
ΔIPt2−0.7921*

(−1.9147)
ΔRt4−4.8853*

(−1.9208)
ΔRt1+−25.6871***

(−5.2896)
ΔRt14.8813**

(2.4691)
ΔIPt2−1.5084***

(−2.8157)
ΔRt1+−17.6880***

(−3.5183)
ΔOP+0.3649***

(2.7854)
ΔRt2+20.6602***

(4.6695)
ΔOP+0.4666***

(5.1385)
ΔIPt4−0.8684**

(−1.7209)
ΔRt2+13.9799**

(2.4783)
ΔRt3+−9.8829**

(−2.4895)
ΔRt5+−31.8232***

(−5.1228)
ΔRt5+−34.5394***

(−4.7332)
ΔRt5+−21.8519***

(−3.9490)
ΔRt6+43.8767***

(5.2492)
ΔRt6+21.4460***

(3.2412)
ΔRt3−5.2304**

(−2.4884)
ΔRt8+16.8773***

(2.6970)
ΔRt3−7.8888***

(−3.0169)
ΔRt4−4.6647***

(−2.7892)
ΔRt212.1020***

(4.9209)
ΔRt56.6704***

(2.7528)
ΔRt54.5166***

(2.8060)
ΔRt49.7710***

(3.2024)
ΔRt6−5.0401**

(−2.4086)
ΔOP+0.4653***

(5.1732)
ΔRt513.0850***

(4.9724)
ΔOP+0.3170***

(3.2214)
ΔOP0.3540***

(5.1783)
ΔRt8−5.5518**

(−2.5104)
ΔOPt4+−0.1976*

(−1.8858)
ΔOP+0.5233***

(4.4420)
ΔOPt10.3684***

(4.5213)
ΔOPt1+−0.2850**

(−2.2161)
ΔOPt20.2228**

(2.6094)
ΔOPt10.4398***

(4.5670)
ΔOPt30.2780***

(3.5136)
Diagnostic tests
R20.7158R20.7831R20.5114R20.5596R20.8057R20.6842
R2 adjusted0.6346R2 adjusted0.7226R2 adjusted0.4466R2 adjusted0.5107R2 adjusted0.7630 R2 adjusted0.6435
DW1.9443DW1.8073DW2.0917DW2.0849DW2.0080DW2.1738
Xsc20.9749

(0.4805)
Xsc20.4583

(0.9324)
Xsc20.8517

(0.5978)
Xsc20.3751

(0.9690)
Xsc20.6679

(0.7767)
Xsc2 0.5730

(0.8584)
Xhs20.0946

(0.7590)
Xhs21.3387

(0.1989)

Xhs20.7815

(0.6692)

Xhs20.0008

(0.9773)
Xhs20.2206

(0.6395)
Xhs21.5776

(0.1009)

Xff20.3263

(0.5694)
Xff20.0368

(0.8482)
Xff20.5066

(0.4772)
Xff23.6190*

(0.0601)
Xff21.3532

(0.2457)
Xff20.1809

(0.6715)
Consumer goodsConsumer servicesIndustrialUtilitiesTechnology
Constant0.3855***

(4.7694)
Constant0.2966***

(4.8708)
Constant0.3386***

(4.2120)
Constant0.0226

(0.1553)
Constant−0.0358

(−0.5414)
SPt–1−0.1379***

(−4.3904)
SPt–1−0.3158***

(−4.9243)
SPt–1−0.2489***

(−4.0376)
SPt–1−0.2468***

(−3.8615)
SPt–10.0117***

(3.2924)
IPt1+−0.0872

(−0.9882)
IPt1+0.3275***

(3.1051)
IPt1+0.1181

(0.9629)
IPt1+0.3476***

(3.5507)
IPt1+0.0285

(0.3575)
IPt1−0.2415**

(−2.3540)
IPt1−0.0051

(−0.0449)
IPt1−0.3608**

(−2.5287)
IPt10.1065

(0.8739)
IPt1−0.1401*

(−1.6803)
Rt1+1.1940

(0.4012)
Rt1+11.8051***

(4.4384)
Rt1+−0.1504

(−0.0461)
Rt1+−10.9651**

(−2.5759)
Rt1+−1.3853

(−0.9393)
Rt11.7416

(1.4568)
Rt15.7498***

(5.5055)
Rt13.6354***

(3.2606)
Rt1−6.1320**

(−2.1371)
Rt10.0077

(0.0157)
OPt1+−0.0495

(−1.5894)
OPt1+−0.1041***

(−3.8740)
OPt1+−0.0251

(−0.5408)
OPt1+0.0611

(1.5768)
OPt1+−0.0256

(−1.2997)
OPt1−0.0244*

(−1.9350)
OPt1−0.0252**

(−2.1745)
OPt1−0.0129

(−0.7624)

+
OPt1−0.0114

(−0.8151)
OPt1−0.0019

(−0.1542)
ΔSPt−30.2125***

(3.0155)
ΔIP+1.2110***

(5.6151)
ΔSPt−1−0.1992**

(−2.5315)
ΔSPt−9−0.1992***

(−3.3079)
ΔSPt−2−0.2860***

(−3.9919)
ΔSPt−60.1691**

(2.2632)
ΔIP

0.5667**

(2.0685)
ΔIP+0.8145**

(2.3193)
ΔIP+0.8962***

(3.3349)
ΔSPt−50.2867***

(4.1035)
ΔIP+0.9233***

(3.2204)
ΔIPt10.6415***

(2.7169)
ΔIPt3+0.9530**

(2.5890)
ΔIPt7+−0.6645**

(−2.4602)
ΔIP+1.0730***

(5.4551)
ΔIP1.0257***

(2.8363)
ΔIPt30.8984***

(3.6255)
ΔIPt4+0.8928**

(2.3998)
ΔIPt8+−0.8032***

(−3.2581)
ΔIPt3+0.6775***

(3.3330)
ΔIPt11.0081***

(3.3016)
ΔIPt50.6227**

(2.5288)
ΔIPt11.3945***

(3.8697)
ΔIP0.6361*

(1.8235)
ΔIPt4+0.7344***

(3.4601)
ΔRt1+−14.7468**

(−2.5656)
ΔRt1+−36.0254***

(−6.9997)
ΔRt1+−24.1456***

(−4.8631)
ΔIPt50.6504**

(2.4642)
ΔIP0.6419***

(2.8832)
ΔRt5+−12.6535***

(−3.9660)
ΔRt3+−12.0108***

(−3.1325)
ΔRt5+−31.9394***

(−5.7882)
ΔIPt60.7541**

(2.5976)
ΔIPt4−0.7389***

(−3.5503)
ΔOPt5+−0.2435***

(−2.9237)
ΔRt33.7042**

(2.3593)
ΔRt3−4.5614*

(−1.8648)
ΔRt9+−9.4610***

(−3.0392)
ΔR+6.8242***

(2.7700)
ΔOP0.1619***

(2.7015)
ΔRt45.8714***

(4.2893)
ΔOP+0.2516**

(2.5111)
ΔR−16.9196**

(−2.6239)
ΔRt2+11.3741***

(3.8009)
ΔOPt6−0.1016*

(−1.8900)
ΔOP−0.0960**

(−2.0814)
ΔOPt10.2072**

(2.5890)
ΔRt5−4.9288***

(−3.0992)
ΔOP0.1392***

(3.1540)
ΔOP+0.2720***

(3.4823)
ΔOPt10.1048**

(2.3555)
Diagnostic tests
R20.6884 R20.7358 R20.6618 R20.6458 R20.6563
R2 adjusted0.6239 R2 adjusted0.6817 R2 adjusted0.6006 R2 adjusted0.5640R2 adjusted0.5905
DW1.5961DW2.0880DW2.0907DW1.8771DW2.0238
Xsc20.6479

(0.7939)
Xsc21.6292

(0.1029)
Xsc20.5125

(0.9010)
Xsc20.8493

(0.6006)
Xsc21.0980

(0.3731)
Xhs20.2970

(0.5870)
Xhs20.0348

(0.8522)
Xhs20.7815

(0.6692)

Xhs21.0712

(0.3861)

Xhs21.0276

(0.3129)
Xff20.4581

(0.5004)
Xff20.0017

(0.9663)
Xff22.2777

(0.1346)
Xff20.9665

(0.3286)
Xff21.5960

(0.2096)

  1. This table reports the results of the estimation of the best-fitted NARDL model for the adjustment of the industry CDS index spreads to positive and negative unit changes in respective industry stock prices and other financial determinants. The superscripts + and − denote positive and negative partial sums, respectively. LIV+ and LIV are the estimated long-run coefficients associated with positive and negative changes of the variable IV, respectively, defined by L^=θ^/ρ^. Adj. R2 represents the value of the adjusted R2 coefficient of the estimated model. DW,χSC2, χH,2 and χFF2 denote the Durbin-Watson test, LM tests for serial correlation, heteroskedasticity, and functional form, respectively. The superscripts *, **, and *** indicate the 10%, 5%, and 1% levels of significance, respectively.

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Supplementary Material

The online version of this article offers supplementary material (DOI: https://doi.org/10.1515/snde-2019-0066).


Published Online: 2020-02-11

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