This study investigates the occurrence of stock market contagion effects stemming from strategic commodities and the United States (U.S.) equity markets to major oil and gas exporting nations amid the COVID-19 and Russian-Ukraine crises. Employing a multi-factor asset pricing model and risks spillover technique, we scrutinize the sensitivities of market returns to these risk factors and the dynamics of shocks transmission among market sensitivities over time. Our findings reveal that these equity markets generally demonstrate positive and variable sensitivities to the three factors, with Canada, UAE, Kuwait and Saudi Arabia experiencing significant periods of negative response to the gas price factor. Notably, the Russian market exhibited the highest responsiveness to the U.S. factor at the outbreak of the Russian-Ukraine war, whereas the Russian market displays the greatest sensitivity to both oil and gas price risks. The degree of shocks propagation among market sensitivities is about 75.8% and is mainly driver by sensitivities to the U.S. market factor in the energy market, followed by the sensitivity of oil prices to the gas market. Policymakers in these nations should be cautious of potential contagion from the US market and these critical commodities, particularly oil, to mitigate any adverse impacts on their economies.
AbidIlyesKhaledGuesmiStéphaneGoutteChristianUrom and JulienChevallier. (2019a). "Commodities risk premia and regional integration in gas-exporting countries." Energy Economics80: 267–276. https://doi.org/10.1016/j.eneco.2018.12.027
2.
AbidIlyes, OlfaKaabia, and KhaledGuesmi. (2014). "Stock market integration and risk premium: Empirical evidence for emerging economies of South Asia." Economic Modelling37: 408–416. https://doi.org/10.1016/j.econmod.2013.ll.015
3.
AbidIlyesStéphaneGoutte, KhaledGuesmi, and IbrahimJamali. (2019b). "Transmission of shocks and contagion from US to MENA equity markets: The role of oil and gas markets." Energy Policy134: 110953. https://doi.org/10.1016/j.enpol.2019.110953
4.
AcaravciAli, IlhanOzturk, and SerkanYilmaz Kandir. (2012). "Natural gas prices and stock prices: Evidence from EU-15 countries." Economic Modelling29(5)1646–1654. https://doi.org/10.1016/j.econmod.2012.05.006.
5.
AhmedAbdullahi D., and RuiHuo. (2021). "Volatility transmissions across international oil market, commodity futures and stock markets: Empirical evidence from China." Energy Economics93: 104741. https://doi.org/10.1016/j.eneco.2020.104741
6.
AhmedWalid MA. (2018). "On the interdependence of natural gas and stock markets under structural breaks." The Quarterly Review of Economics and Finance 67:149–161. https://doi.org/10.1016/j.qref.2017.06.003
7.
AlamgirFarzana and Sakib BinAmin (2021). "The nexus between oil price and stock market: Evidence from South Asia." Energy Reports7: 693–703. https://doi.org/10.1016/j.egyr.2021.01.027
8.
AntonakakisN.ChatziantoniouI., & GabauerD. (2020). "Refined measures of dynamic connectedness based on time-varying parameter vector autoregressions." Journal of Rick and Financial Management13 (4), 84. https://www.mdpi.com/1911-8074/13/4/84
9.
ArouriMohamed El Hedi and ChristopheRault. (2012). "Oil prices and stock markets in GCC countries: empirical evidence from panel analysis." International Journal of Finance & Economics17(3)242–253. https://doi.org/10.1002/ijfe.443
10.
AtifMohdMustafa RazaRabbaniHana BawazirIqbalThonseHawaldarDaouiaChebab, SitaraKarim, and AmaniAlAbbas. (2022). "Oil price changes and stock returns: Fresh evidence from oil exporting and oil importing countries." Cogent Economics & Finance10 (1): 2018163. https://doi.org/10.1080/23322039.2021.2018163.
11.
AzimliAsil. (2020). "The oil price risk and global stock returns." Energy198: 117320. https://doi.org/10.1016/j.en-ergy.2020.117320.
12.
BaumeisterChristiane and LutzKilian. (2016). "Forty years of oil price fluctuations: Why the price of oil may still surprise us." Journal of Economic Perspectives30(1)139–160. https://doi.org/10.1257/jep.30.l.139
13.
BekaertGeertCampbellR. Harvey and AngelaNg. (2005). "Market Integration and Contagion." The Journal of Business78(1):39–69. https://doi.org/10.1086/426519.
14.
BekaertGeertMichaelEhrmann, MarcelFratzscher, and ArnaudMehl. (2014). "The global crisis and equity market contagion." The Journal of Finance69 (6): 2597–2649. https://doi.org/10.llll/jofi.12203
15.
AnnaCretiFtitiZied, and GuesmiKhaled. (2014) "Oil price and financial markets: Multivariate dynamic frequency analysis." Energy policy73: 245–258. https://doi.org/10.1016/j.enpol.2014.05.057
16.
JuncalCunado and FernandoPerez de Gracia. (2014). "Oil price shocks and stock market returns: Evidence for some European countries." Energy Economics42: 365–377. https://doi.org/10.1016/j.eneco.2013.10.017
17.
StavrosDegiannakisFilisGeorge, and ChristosFloros. (2013). "Oil and stock returns: Evidence from European industrial sector indices in a time-varying environment." Journal of International Financial Markets, Institutions and Money26: 175–191. https://doi.org/10.1016/j.intfin.2013.05.007
18.
StavrosDegiannakisFilisGeorge, and RenatasKizys. (2014). "The effects of oil price shocks on stock market volatility: Evidence from European data." The Energy Journal35(1)35–56. https://doi.org/10.5547/01956574.35.l.3
19.
GeorgeFilisDegiannakisStavros, and ChristosFloros. (2011). "Dynamic correlation between stock market and oil prices: The case of oil-importing and oil-exporting countries." International review of financial analysis20(3)152–164. https://doi.org/10.1016/j.irfa.2011.02.014
20.
KhaledGuesmi and SalmaFattoum. (2014). "Return and volatility transmission between oil prices and oil-exporting and oil-importing countries." Economic Modelling38: 305–310. https://doi.org/10.1016/j.econmod.2014.01.022.
21.
KhaledGuesmiAbidIlyes, AnnaCreti and JulienChevallier. (2018). "Oil price risk and financial contagion." The Energy Journal39 (2). 10.5547/01956574.39.SI2.kgue
22.
HassanEnas A.MichaelaRankin and WeiLu. (2014). "The development of accounting regulation in Iraq and the IFRS adoption decision: an institutional perspective." The International Journal of Accounting49(3)371–390. https://doi.org/10.1016/j.intacc.2014.07.001.
23.
IrwinScott H. and DwightR. Sanders. (2012). "Financialization and structural change in commodity futures markets." Journal of agricultural and applied economics44(3)371–396. https://doi.org/10.1017/S1074070800000481
24.
KoopG., & KorobilisD. (2014). "A new index of financial conditions." European Economic Review 71, 101–116. https://doi.org/10.1016/j.euroecorev.2014.07.002
25.
LingLinZhouZhongbao, QingLiu, and YongJiang. (2019). "Risk transmission between natural gas market and stock markets: Portfolio and hedging strategy analysis." Finance Research Letters29: 245–254. https://doi.org/10.1016/j.frl.2018.08.011.
26.
WalidMensiMobeenUr Rehman, DebasishMaitra, KhamisHamed Al-Yahyaee, and XuanVinh Vo. (2021). "Oil, natural gas and BRICS stock markets: Evidence of systemic risks and comovements in the time-frequency domain." Resources Policy 72:102062. https://doi.org/10.1016/j.resourpol.2021.102062.
27.
MohantySunil K.MohanNandhaAbdullahQ. Turkistani and MuhammedY. Alaitani. (2011) "Oil price movements and stock market returns: Evidence from Gulf Cooperation Council (GCC) countries." Global Finance Journal22(1)42–55. https://doi.org/10.1016/j.gfj.2011.05.004
28.
MokniKhaled. (2020). "Time-varying effect of oil price shocks on the stock market returns : Evidence from oil-importing and oil-exporting countries." Energy Reports6: 605–619. https://doi.org/10.1016/j.egyr.2020.03.002
29.
MollickAndré Varella, and TibebeAbebe Assefa. (2013). "US stock returns and oil prices: The tale from daily data and the 2008-2009 financial crisis." Energy Economics36: 1–18. https://doi.org/10.1016/j.eneco.2012.ll.021
30.
ShakyaS.LiB., & EtienneX. (2022). "Shale revolution, oil and gas prices, and drilling activities in the United States." Energy Economics 108,105877. https://doi.org/10.1016/j.eneco.2022.105877
31.
AnnastiinaSilvennoinen and SusanThorp. (2013). "Financialization, crisis and commodity correlation dynamics." Journal of International Financial Markets, Institutions and Money24: 42–65. https://doi.org/10.1016/j.intfin.2012.ll.007
32.
TchatokaFirmin Doko, VirginieMasson, and SeanParry. (2019). "Linkages between oil price shocks and stock returns revisited." Energy Economics82: 42–61. https://doi.org/10.1016/j.eneco.2018.02.016
33.
YudongWangWuChongfeng, and LiYang. (2013). "Oil price shocks and stock market activities: Evidence from oil-importing and oil-exporting countries." Journal of Comparative economics41(4)1220–1239. https://doi.org/10.1016/j.jce.2012.12.004
Supplementary Material
Please find the following supplemental material available below.
For Open Access articles published under a Creative Commons License, all supplemental material carries the same license as the article it is associated with.
For non-Open Access articles published, all supplemental material carries a non-exclusive license, and permission requests for re-use of supplemental material or any part of supplemental material shall be sent directly to the copyright owner as specified in the copyright notice associated with the article.
