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Energy profile and oil shocks: a dynamic analysis of their impact on stock markets

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Abstract

The paper investigates the intricate relationship between oil and stock markets in the context of different oil price shocks and a country's energy profile. Focusing on five major oil-producing and consuming countries, the analysis reveals a significant, time-varying dimension in the oil-stock relationship. It highlights the importance of distinguishing between various types of oil shocks and a nation's reliance on oil revenues. The paper finds that countries heavily reliant on oil revenues exhibit robust responses to oil supply and demand shocks. In contrast, oil producers show more moderate reactions due to lower oil revenue dependence. This evidences the importance of recognizing the multifaceted impacts of oil shocks on different economies for making well-informed decisions in asset allocation, portfolio management, and policymaking.

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Data availability

The data that support the findings of this study are available on request from the corresponding author.

Notes

  1. For more information, please refer to Ready (2018) and Kolodzej and Kaufmann (2014).

  2. Most of notations borrowed from Shi et al. (2020).

  3. We also tested varying window sizes 0.25 (equivalent to 882 days) and 0.30 (equivalent to 1057 days) but found consistent results. These results are not included in the paper due to space constraints; however, they are available upon request from the authors.

  4. Calculated as \(r_t = \ln \left( {\frac{p_t }{{p_{t - 1} }}} \right)\), where \(p_t\) represents the daily price observed at time t.

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Acknowledgements

The authors extend their appreciation to the anonymous reviewers whose feedback and insights have significantly enhanced the quality of this paper.

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  1. Faculty of Business, Al-Ahliyya Amman University, Amman, Jordan

    Salem Adel Ziadat

  2. Department of Economics and Finance, United Arab Emirates University, Al Ain, United Arab Emirates

    Aktham Maghyereh

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Ziadat, S.A., Maghyereh, A. Energy profile and oil shocks: a dynamic analysis of their impact on stock markets. Eurasian Econ Rev (2024). https://doi.org/10.1007/s40822-024-00277-9

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