1. Home
  2. Vol 8, No 6 (2024)
  3. Pessoa

Energy Price Impact on BRIC Stock Markets: A Granger Causality Analysis

Gustavo Pessoa, Vadim Ponkratov, David Philippov, Olga Shvyreva, Nikolay Kuznetsov, Izabella Elyakova, Elena Mikhina, Natalya Kotova, Andrey Pozdnyaev, Akmal Durmanov, Tatiana Bloshenko

Abstract


Energy prices and the stock market are two of the crucial factors in the evolving landscape of global finance, particularly in major emerging economies. However, research on how energy price changes impact stock markets in BRIC countries remains limited, despite their diverse roles in global energy markets and economies. This study investigates the causal dynamics between energy prices and stock market performance in BRIC countries, aiming to uncover short-term fluctuations and long-run relationships in these major emerging economies. Utilizing daily data from 2013 to 2023, stationarity tests, cointegration analysis, and Granger causality tests are employed to examine these relationships. Key findings reveal weak evidence of a long-run equilibrium between energy prices and stock market indices, challenging previous assumptions about their cointegration. More significantly, the findings uncovered a strong unidirectional Granger causality from oil prices to all BRIC stock market indices, while gas prices show a more selective influence. Notably, no evidence of reverse causality from stock markets to energy prices was found, highlighting the exogenous nature of global energy prices in relation to BRIC stock markets. This study uniquely analyzes oil and gas price effects on BRIC stock markets, offering insights for investors and policymakers amid increasing commodity-financial market integration.

 

Doi: 10.28991/ESJ-2024-08-06-015

Full Text: PDF


Keywords


BRIC Countries; Energy Prices; Stock Market Performance; Granger Causality; Emerging Economies.

References


Panda, B., Panda, A. K., & Panda, P. (2023). Macroeconomic Response to BRICS Countries Stock Markets Using Panel VAR. Asia-Pacific Financial Markets, 30(1), 259–272. doi:10.1007/s10690-023-09399-7.

Coquidé, C., Lages, J., & Shepelyansky, D. L. (2023). Prospects of BRICS currency dominance in international trade. Applied Network Science, 8(1), 65. doi:10.1007/s41109-023-00590-3.

Acheampong, A. O., Adebayo, T. S., Dzator, J., & Koomson, I. (2023). Income inequality and economic growth in BRICS: insights from non-parametric techniques. Journal of Economic Inequality, 21(3), 619–640. doi:10.1007/s10888-023-09567-9.

Panda, P., Ahmad, W., & Thiripalraju, M. (2023). Better to Give than to Receive: A Study of BRICS Countries Stock Markets. Journal of Emerging Market Finance, 22(2), 164–188. doi:10.1177/09726527231154100.

Mamman, S. O., Wang, Z., & Iliyasu, J. (2023). Commonality in BRICS stock markets’ reaction to global economic policy uncertainty: Evidence from a panel GARCH model with cross sectional dependence. Finance Research Letters, 55, 103877. doi:10.1016/j.frl.2023.103877.

Wang, N., & You, W. (2023). New insights into the role of global factors in BRICS stock markets: A quantile cointegration approach. Economic Systems, 47(2), 101015. doi:10.1016/j.ecosys.2022.101015.

Kayani, U., Hassan, M. K., Dejan, A., Khan, M., & Nawaz, F. (2024). Assessment of Economic Policy Uncertainty spillovers: A cross-border analysis of global and BRIC economies. International Economics, 179. doi:10.1016/j.inteco.2024.100530.

Lissovolik, Y. (2024). BRICS expansion: new geographies and spheres of cooperation. Editorial for special Issue. BRICS Journal of Economics, 5(1), 1–12. doi:10.3897/brics-econ.5.e120071.

Agyei, S. K., Junior, P. O., Bossman, A., Asafo-Adjei, E., Asiamah, O., & Adam, A. M. (2022). Spillovers and contagion between BRIC and G7 markets: New evidence from time-frequency analysis. PLoS ONE, 17(7 July), 271088. doi:10.1371/journal.pone.0271088.

Ramluckun, R., Malumbazo, N., & Ngubevana, L. (2024). A Review of the Energy Policies of the BRICS Countries: The Possibility of Adopting a Just Energy Transition for South Africa. Sustainability (Switzerland), 16(2), 703. doi:10.3390/su16020703.

Coutinho, L. C., Império, M., Angelkorte, G., da Silva, G. N., Bergman-Fonte, C., Draeger, R., Cunha, B. S. L., Rochedo, P. R. R., Szklo, A., & Schaeffer, R. (2024). Climate strategies for oil and gas production under the lens of an Integrated Assessment Model: The case of Brazil. International Journal of Greenhouse Gas Control, 137, 104231. doi:10.1016/j.ijggc.2024.104231.

Kutcherov, V., Morgunova, M., Bessel, V., & Lopatin, A. (2020). Russian natural gas exports: An analysis of challenges and opportunities. Energy Strategy Reviews, 30, 100511. doi:10.1016/j.esr.2020.100511.

Ahmad, T., & Zhang, D. (2020). A critical review of comparative global historical energy consumption and future demand: The story told so far. Energy Reports, 6, 1973–1991. doi:10.1016/j.egyr.2020.07.020.

Hussain, S., Ali, R., Emam, W., Tashkandy, Y., Mishra, P., Fahlevi, M., & Matuka, A. (2023). Economic Policy Uncertainty and Firm Value: Impact of Investment Sentiments in Energy and Petroleum. Sustainability (Switzerland), 15(12), 9656. doi:10.3390/su15129656.

Alamgir, F., & Amin, S. Bin. (2021). The nexus between oil price and stock market: Evidence from South Asia. Energy Reports, 7, 693–703. doi:10.1016/j.egyr.2021.01.027.

Guan, Y., Yan, J., Shan, Y., Zhou, Y., Hang, Y., Li, R., Liu, Y., Liu, B., Nie, Q., Bruckner, B., Feng, K., & Hubacek, K. (2023). Burden of the global energy price crisis on households. Nature Energy, 8(3), 304–316. doi:10.1038/s41560-023-01209-8.

Ellili, N. O. D. (2022). Impact of ESG disclosure and financial reporting quality on investment efficiency. Corporate Governance (Bingley), 22(5), 1094–1111. doi:10.1108/CG-06-2021-0209.

Watanabe, O. V., Imhof, M. J., & Tartaroglu, S. (2019). Transparency regulation and stock price informativeness: Evidence from the European Union’s transparency directive. Journal of International Accounting Research, 18(2), 89–113. doi:10.2308/jiar-52383.

Ullah, S., Akhtar, P., & Zaefarian, G. (2018). Dealing with endogeneity bias: The generalized method of moments (GMM) for panel data. Industrial Marketing Management, 71, 69–78. doi:10.1016/j.indmarman.2017.11.010.

Aksenov, G., Li, R., Abbas, Q., Fambo, H., Popkov, S., Ponkratov, V., Kosov, M., Elyakova, I., & Vasiljeva, M. (2023). Development of Trade and Financial-Economical Relationships between China and Russia: A Study Based on the Trade Gravity Model. Sustainability (Switzerland), 15(7), 6099. doi:10.3390/su15076099.

Enikolopov, R., Petrova, M., & Stepanov, S. (2014). Firm value in crisis: Effects of firm-level transparency and country-level institutions. Journal of Banking and Finance, 46(1), 72–84. doi:10.1016/j.jbankfin.2014.04.028.

Asongu, S. A., & Odhiambo, N. M. (2020). Foreign direct investment, information technology and economic growth dynamics in Sub-Saharan Africa. Telecommunications Policy, 44(1), 101838. doi:10.1016/j.telpol.2019.101838.

T. Kumar, D. M. (2024). Assessment of the Relationship between Foreign Direct Investment in India and the Top-5 GDP Countries: a Panel Study. Istanbul Journal of Social Sciences and Humanities, 2(1), 43–50. doi:10.62185/issn.3023-5448.2.1.4.

Phan, D. H. B., Iyke, B. N., Sharma, S. S., & Affandi, Y. (2021). Economic policy uncertainty and financial stability–Is there a relation? Economic Modelling, 94, 1018–1029. doi:10.1016/j.econmod.2020.02.042.

Caporale, G. M., Menla Ali, F., & Spagnolo, N. (2015). Oil price uncertainty and sectoral stock returns in China: A time-varying approach. China Economic Review, 34, 311–321. doi:10.1016/j.chieco.2014.09.008.

Hsu, P. H., Liang, H., & Matos, P. (2023). Leviathan Inc. and Corporate Environmental Engagement. Management Science, 69(12), 7719–7758. doi:10.1287/mnsc.2021.4064.

Ghulam, Y., & Dhruva, K. (2024). Banking sector reforms in a challenging environment: An emerging financial market experience. International Review of Economics and Finance, 92, 1074–1096. doi:10.1016/j.iref.2024.02.057.

Vasiljeva, M. V., Ponkratov, V. V., Vatutina, L. A., Volkova, M. V., Ivleva, M. I., Romanenko, E. V., Kuznetsov, N. V., Semenova, N. N., Kireeva, E. F., Goncharov, D. K., & Elyakova, I. D. (2022). Crude Oil Market Functioning and Sustainable Development Goals: Case of OPEC++-Participating Countries. Sustainability (Switzerland), 14(8), 4742. doi:10.3390/su14084742.

Hongli, J., Linke, H., & Pengcheng, J. Capital Market Liberalization and Enterprise Labor Income Share: A Quasi-natural Experiment Based on “Shanghai-Hong Kong Stock Connect. Scheme. Journal of Shanghai University of Finance and Economics, 24, 32–47. doi:10.16538/j.cnki.jsufe.2022.01.003.

Jain, A., & Biswal, P. C. (2016). Dynamic linkages among oil price, gold price, exchange rate, and stock market in India. Resources Policy, 49, 179–185. doi:10.1016/j.resourpol.2016.06.001.

Xie, S., & Qu, Q. (2016). The Three-Factor Model and Size and Value Premiums in Chinas Stock Market. Emerging Markets Finance and Trade, 52(5), 1092–1095. doi:10.1080/1540496X.2016.1143250.

Shang, J., & Hamori, S. The response of oil-importing and oil-exporting countries’ macroeconomic aggregates to crude oil price shocks: some international evidence. Eurasian Economic Review. doi:10.1007/s40822-024-00281-z.

Zhang, C., & Shang, H. (2023). Asymmetry effect of oil price shocks and the lagging effect of oil price jumps: Evidence from China’s automobile markets. Energy Policy, 172, 113308. doi:10.1016/j.enpol.2022.113308.

Raza Rabbani, M., Hassan, M. K., Jamil, S. A., Sahabuddin, M., & Shaik, M. (2024). Revisiting the impact of geopolitical risk on Sukuk, stocks, oil and gold markets during the crises period: fresh evidence from wavelet-based approach. Managerial Finance, 50(3), 514–533. doi:10.1108/MF-12-2022-0587.

Liu, Z., Zhu, T., Duan, Z., Xuan, S., Ding, Z., & Wu, S. (2023). Time-varying impacts of oil price shocks on China’s stock market under economic policy uncertainty. Applied Economics, 55(9), 963–989. doi:10.1080/00036846.2022.2095342.

Ge, Z. (2023). The asymmetric impact of oil price shocks on China stock market: Evidence from quantile-on-quantile regression. Quarterly Review of Economics and Finance, 89, 120–125. doi:10.1016/j.qref.2023.03.009.

Dildar, A., Bhutta, N. T., & Kosar, J. Dynamic Correlations between Oil Prices and the Stock Prices of Food Sector Firms: Evidence from Oil Exporting-Importing Countries. Journal of Positive School Psychology, 7(5), 269–280.

Zhang, H., Jin, C., Bouri, E., Gao, W., & Xu, Y. (2023). Realized higher-order moments spillovers between commodity and stock markets: Evidence from China. Journal of Commodity Markets, 30, 100275. doi:10.1016/j.jcomm.2022.100275.

Fry-McKibbin, R., & McKinnon, K. (2023). The evolution of commodity market financialization: Implications for portfolio diversification. Journal of Commodity Markets, 32, 100360. doi:10.1016/j.jcomm.2023.100360.

Al-Fayoumi, N., Bouri, E., & Abuzayed, B. (2023). Decomposed oil price shocks and GCC stock market sector returns and volatility. Energy Economics, 126, 106930. doi:10.1016/j.eneco.2023.106930.

Wen, X., Guo, Y., Wei, Y., & Huang, D. (2014). How do the stock prices of new energy and fossil fuel companies correlate? Evidence from China. Energy Economics, 41, 63–75. doi:10.1016/j.eneco.2013.10.018.

Liu, J., Hu, Y., Yan, L. Z., & Chang, C. P. (2023). Volatility spillover and hedging strategies between the European carbon emissions and energy markets. Energy Strategy Reviews, 46, 101058. doi:10.1016/j.esr.2023.101058.

Wang, Y., Liu, S., Abedin, M. Z., & Lucey, B. (2024). Volatility spillover and hedging strategies among Chinese carbon, energy, and electricity markets. Journal of International Financial Markets, Institutions and Money, 91, 101938. doi:10.1016/j.intfin.2024.101938.

Basher, S. A., & Sadorsky, P. (2006). Oil price risk and emerging stock markets. Global Finance Journal, 17(2), 224–251. doi:10.1016/j.gfj.2006.04.001.

Zhu, H. M., Li, S. F., & Yu, K. (2011). Crude oil shocks and stock markets: A panel threshold cointegration approach. Energy Economics, 33(5), 987–994. doi:10.1016/j.eneco.2011.07.002.

Johansen, S., & Juselius, K. (1990). Maximum Likelihood Estimation and Inference on Cointegration — With Applications to the Demand for Money. Oxford Bulletin of Economics and Statistics, 52(2), 169–210. doi:10.1111/j.1468-0084.1990.mp52002003.x.

Filis, G., Degiannakis, S., & Floros, C. (2011). Dynamic correlation between stock market and oil prices: The case of oil-importing and oil-exporting countries. International Review of Financial Analysis, 20(3), 152–164. doi:10.1016/j.irfa.2011.02.014.

Koh, W. C. (2015). Oil Price Shocks and Stock Markets in ASEAN-5. Southeast Asian Journal of Economics, 3(1), 143–164.

Zhang, C., & Chen, X. (2011). The impact of global oil price shocks on China’s stock returns: Evidence from the ARJI(-ht)-EGARCH model. Energy, 36(11), 6627–6633. doi:10.1016/j.energy.2011.08.052.

Park, J., & Ratti, R. A. (2008). Oil price shocks and stock markets in the U.S. and 13 European countries. Energy Economics, 30(5), 2587–2608. doi:10.1016/j.eneco.2008.04.003.

Narayan, P. K., & Narayan, S. (2010). Modelling the impact of oil prices on Vietnam’s stock prices. Applied Energy, 87(1), 356–361. doi:10.1016/j.apenergy.2009.05.037.

Abhyankar, A., Xu, B., & Wang, J. (2013). Oil price shocks and the stock market: Evidence from Japan. Energy Journal, 34(2), 199–222. doi:10.5547/01956574.34.2.7.

Aloui, R., Aïssa, M. S. Ben, & Nguyen, D. K. (2011). Global financial crisis, extreme interdependences, and contagion effects: The role of economic structure? Journal of Banking and Finance, 35(1), 130–141. doi:10.1016/j.jbankfin.2010.07.021.

Bhar, R., & Nikolova, B. (2009). Oil prices and equity returns in the BRIC countries. World Economy, 32(7), 1036–1054. doi:10.1111/j.1467-9701.2009.01194.x.

Engle, R. F., & Granger, C. W. J. (2015). Co-integration and error correction: Representation, estimation, and testing. Applied Econometrics, 39(3), 107–135. doi:10.2307/1913236.

Maghyereh, A., & Al-Kandari, A. (2007). Oil prices and stock markets in GCC countries: new evidence from nonlinear cointegration analysis. Managerial Finance, 33(7), 449–460. doi:10.1108/03074350710753735.

Cong, R. G., Wei, Y. M., Jiao, J. L., & Fan, Y. (2008). Relationships between oil price shocks and stock market: An empirical analysis from China. Energy Policy, 36(9), 3544–3553. doi:10.1016/j.enpol.2008.06.006.

Mensi, W., Hammoudeh, S., Reboredo, J. C., & Nguyen, D. K. (2014). Do global factors impact BRICS stock markets? A quantile regression approach. Emerging Markets Review, 19, 1–17. doi:10.1016/j.ememar.2014.04.002.

Ji, Q., Liu, B. Y., Zhao, W. L., & Fan, Y. (2020). Modelling dynamic dependence and risk spillover between all oil price shocks and stock market returns in the BRICS. International Review of Financial Analysis, 68, 101238. doi:10.1016/j.irfa.2018.08.002.

Cheng, I. H., & Xiong, W. (2014). Financialization of commodity markets. Annual Review of Financial Economics, 6(1), 419–941. doi:10.1146/annurev-financial-110613-034432.

Liu, L., Wang, E. Z., & Lee, C. C. (2020). Impact of the COVID-19 pandemic on the crude oil and stock markets in the US: A time-varying analysis. Energy Research Letters, 1(1). doi:10.46557/001c.13154.

Agyei, S. K., Bossman, A., Benchie, J. K. O., Asiamah, O., & Arhin, E. Y. (2023). Time-Frequency Analysis of COVID-19 Shocks and Energy Commodities. Complexity, 2023, 1–16. doi:10.1155/2023/3982443.


Full Text: PDF

DOI: 10.28991/ESJ-2024-08-06-015

Refbacks

  • There are currently no refbacks.