Causality-in-quantiles between crude oil and stock markets: Evidence from emerging economies

Abstract

This study investigates the asymmetric effect of crude oil shocks on emerging sectoral stock indices using a non-parametric causality-in-quantiles approach. This study considers the origin of the oil shock i.e. demand shock or supply shock to investigate its impact on various sectors in mean and volatility. We find that the impact of crude oil is heterogeneous across shocks (demand or supply), market states (bullish, bearish and normal) and to a limited extent across sectors. Observing a similar pattern of crude oil's impact on emerging sectors, we argue that the influence of crude oil shocks extends beyond energy-intensive sectors.