The Impact of Oil Price Volatility to Oil and Gas Company Stock Returns and Emerging Economies

Abstract

In this paper, we examine the impact of oil price shocks on both selected companies and emerging markets. The novelties of this study can be described as: i) it also includes the recent oil price crisis compared to previous articles in this field, ii) our study considers in details the oil and gas company business acumen to explain the results of the econometric models which is not the case in previous studies, iii) we also include the impact of oil price volatility on emerging markets since oil prices have an importance as explanatory variable of exchange rate movements which makes out study a very comprehensive one. As mostly preferred in many previous studies in this literature, we employed the exponential GARCH (EGARCH) estimation methodology, we concluded that the volatility effect of a given shock to the oil prices and oil and gas company stock price returns are highly persistent and the successive forecasts of the conditional variance converge to the steady state slowly. In addition, we also present The News Impact Curves (NIS) which indicate that the behavior of commodity prices and company stock prices react differently to bad and good news.Keywords: Oil prices, time series, asymmetric volatility, stock returns, oil and gas companies, news impact curvesJEL Classifications: Q4, Q43