The Estimation of Dynamic Systemic Risk and the Volatility Spillover of Oil Market on the Stock Market of OPEC plus Member Countries; QVAR Approach

Document Type : Research Paper

Authors

Faculty of Economics, Allameh Tabataba'i University, Tehran, Iran

10.22059/jte.2024.370722.1008881

Abstract

Crude oil's pivotal role in the global economy has heightened concerns among economists about the impact of oil price shocks. While considerable research has delved into developed and oil-importing economies, there remains a gap in understanding these phenomena in oil-exporting countries. This paper addresses this gap by employing the Quantile Vector Autoregression (QVAR) method to estimate systemic risk and examine the spillover effects of volatilities between the oil and stock markets of OPEC and OPEC Plus member countries. Analyzing daily data spanning from March 1, 2014, to March 1, 2023, the findings reveal a systemic risk of 42%, with a notable increase exceeding 50% in the last three years. OPEC and Brent oil prices emerge as permanent transmitters of fluctuations within the network. Notably, 75% of Iranian stock market return volatilities are attributed to idiosyncratic risks, with systemic risks accounting for only 25%. Furthermore, Iran's stock market is significantly influenced by shocks from OPEC and Brent oil prices. These insights hold implications for regulators and investors, providing a nuanced understanding of the intricate dynamics between systemic risks and volatilities of oil and stock markets.

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Main Subjects

References

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Journal of Economic Research (Tahghighat- E- Eghtesadi)
Volume 59, Issue 3
December 2024
Pages 386-415

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History

  • Receive Date: 06 January 2024
  • Revise Date: 02 June 2024
  • Accept Date: 28 December 2024

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