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Studies in Nonlinear Dynamics & Econometrics

Ed. by Mizrach, Bruce

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Volume 24 (2020)

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

Abderrazak Dhaoui
  • University of Sousse, IHEC, LaREMFiQ, Sousse, Tunisia
  • Ipag Business School (IPAG Lab), Paris, France
  • Other articles by this author:
  • De Gruyter OnlineGoogle Scholar
/ Julien Chevallier / Feng Ma
Published Online: 2020-02-11 | DOI: https://doi.org/10.1515/snde-2019-0066


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.

This article offers supplementary material which is provided at the end of the article.

Keywords: nonlinear ARDL; oil price shocks; sector stock returns; transmission channels

JEL Classification: G11; G12; G1


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Published Online: 2020-02-11

Citation Information: Studies in Nonlinear Dynamics & Econometrics, 20190066, ISSN (Online) 1558-3708, DOI: https://doi.org/10.1515/snde-2019-0066.

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