Oil price risk in selected ASEAN markets
This paper analyzes the oil price risk in four ASEAN markets using a two-factor "market and oil" model and EGARCH(1, 1) variance specification. In the analysis, three alternative non-linear measures of oil prices are used and robustness check of basic results is also performed. The resu...
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| Format: | Article |
| Language: | English |
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Penerbit Universiti Kebangsaan Malaysia
2014
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| Online Access: | http://journalarticle.ukm.my/7803/ http://journalarticle.ukm.my/7803/1/00000002.PDF |
| Summary: | This paper analyzes the oil price risk in four ASEAN markets using a two-factor "market
and oil" model and EGARCH(1, 1) variance specification. In the analysis, three alternative
non-linear measures of oil prices are used and robustness check of basic results is also
performed. The results suggest a direct relation between oil price changes and stock
market returns and indicate no evidence for asymmetric oil price risk for Indonesia.
Meanwhile, the asymmetric oil price risk seems apparent for the markets of Malaysia,
Singapore and Thailand. For an oil exporting Malaysia, the oil price decline tends to
compromise its market performance while the oil price increase does not seem to be
beneficial. In contrast, for oil-importing Singapore and Thailand, the oil price shocks
tend to adversely affect their market returns. The contrasting experiences of these markets
in the face of oil price fluctuations are attributed to the degree of oil dependency, level of
financial development, and trade openness. |
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