The effects of oil price shocks on stock market volatility: evidence from European data

Stavros Degiannakis; George Filis; Renatas Kizys

doi:10.5547/01956574.35.1.3

The effects of oil price shocks on stock market volatility: evidence from European data

Stavros Degiannakis, George Filis, Renatas Kizys

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Abstract

The paper investigates the effects of oil price shocks on stock market volatility in Europe by focusing on three measures of volatility, i.e. the conditional, the realized and the implied volatility. The findings suggest that supply-side shocks and oil specific demand shocks do not affect volatility, whereas, oil price changes due to aggregate demand shocks lead to a reduction in stock market volatility. More specifically, the aggregate demand oil price shocks have a significant explanatory power on both current-and forward-looking volatilities. The results are qualitatively similar for the aggregate stock market volatility and the industrial sectors' volatilities. Finally, a robustness exercise using short-and long-run volatility models supports the findings.

Original language	English
Pages (from-to)	35-56
Journal	The Energy Journal
Volume	35
Issue number	1
DOIs	https://doi.org/10.5547/01956574.35.1.3
Publication status	Published - 2014

Keywords

Conditional Volatility
Realized Volatility
Implied Volatility
Oil Price Shocks
SVAR

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10.5547/01956574.35.1.3

KIZYS_2014_cright_EJ_The Effects of Oil Price Shocks on Stock Market Volatility
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Cite this

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title = "The effects of oil price shocks on stock market volatility: evidence from European data",

abstract = "The paper investigates the effects of oil price shocks on stock market volatility in Europe by focusing on three measures of volatility, i.e. the conditional, the realized and the implied volatility. The findings suggest that supply-side shocks and oil specific demand shocks do not affect volatility, whereas, oil price changes due to aggregate demand shocks lead to a reduction in stock market volatility. More specifically, the aggregate demand oil price shocks have a significant explanatory power on both current-and forward-looking volatilities. The results are qualitatively similar for the aggregate stock market volatility and the industrial sectors' volatilities. Finally, a robustness exercise using short-and long-run volatility models supports the findings. ",

keywords = "Conditional Volatility, Realized Volatility, Implied Volatility, Oil Price Shocks, SVAR",

author = "Stavros Degiannakis and George Filis and Renatas Kizys",

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doi = "10.5547/01956574.35.1.3",

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AU - Degiannakis, Stavros

AU - Filis, George

AU - Kizys, Renatas

PY - 2014

Y1 - 2014

N2 - The paper investigates the effects of oil price shocks on stock market volatility in Europe by focusing on three measures of volatility, i.e. the conditional, the realized and the implied volatility. The findings suggest that supply-side shocks and oil specific demand shocks do not affect volatility, whereas, oil price changes due to aggregate demand shocks lead to a reduction in stock market volatility. More specifically, the aggregate demand oil price shocks have a significant explanatory power on both current-and forward-looking volatilities. The results are qualitatively similar for the aggregate stock market volatility and the industrial sectors' volatilities. Finally, a robustness exercise using short-and long-run volatility models supports the findings.

AB - The paper investigates the effects of oil price shocks on stock market volatility in Europe by focusing on three measures of volatility, i.e. the conditional, the realized and the implied volatility. The findings suggest that supply-side shocks and oil specific demand shocks do not affect volatility, whereas, oil price changes due to aggregate demand shocks lead to a reduction in stock market volatility. More specifically, the aggregate demand oil price shocks have a significant explanatory power on both current-and forward-looking volatilities. The results are qualitatively similar for the aggregate stock market volatility and the industrial sectors' volatilities. Finally, a robustness exercise using short-and long-run volatility models supports the findings.

KW - Conditional Volatility

KW - Realized Volatility

KW - Implied Volatility

KW - Oil Price Shocks

KW - SVAR

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DO - 10.5547/01956574.35.1.3

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JO - The Energy Journal

JF - The Energy Journal

IS - 1

ER -

The effects of oil price shocks on stock market volatility: evidence from European data

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Keywords

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