Non-linear cointegration between oil and stock prices: The role of interest rates

Martínez-Cañete, Ana R.; Cruz, Elena Márquez de la; Pérez-Soba, Inés

doi:10.1016/j.ribaf.2021.101513

Cited by 6 publications

(2 citation statements)

References 38 publications

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“…The banking objects used are 14 BUS and 20 UUS, shari'a banking data is accumulated in the aggregate without regard to the capacity of individual Islamic banks. World oil price data was obtained from OPEC Basket Price, exchange rate data was obtained from Pacific Exchange Rate Service, data from NPF and FDR were obtained from BI Islamic Banking Statistics (Martínez-Cañete et al, 2022).…”

Section: Methodsmentioning

confidence: 99%

World Oil Prices and Exchange Rates on Islamic Banking Risks

Ryandono

Imron

Wildan

2022

IJEEP

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Islamic banking risks are influenced by many factors, facing internal and external banking risks. In this study, the internal banking risks are represented by Credit risk as measured by Non-Performing Financing (NPF) and liquidity risks as measured by Financing to Deposit Ratio (FDR). At the same time, world oil prices and exchange rates represent the external banking risks. World oil price data is obtained from OPEC Price, and exchange rate data is obtained from the Pacific Exchange Rate Service. While the data from NPF and FDR is obtained from BI Statistics of Sharia Banking. The results of this study found that world oil prices have a significant effect on credit risk and liquidity risk in Islamic banking. In contrast, the exchange rate only has a significant effect on credit risk in Islamic banking.

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Section: Methodsmentioning

confidence: 99%

World Oil Prices and Exchange Rates on Islamic Banking Risks

Ryandono

Imron

Wildan

2022

IJEEP

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“…However, if there were a sharp cut in interest rates, it would be positive for Zambia’s stock market, as it would provide a demand pull for more investors to move from bonds to equities. In a recent study, Martínez-Canete et al (2022) apply a cointegrating smooth transition regression approach using a global shadow rate as the transition variable to take into account the possible effects of unconventional monetary policy measures on the oil–stock price linkage and find a positive non-linear long-run relationship exists between oil prices and the MSCI World Index, which depends on the level of a global shadow rate, regardless of whether this rate is constructed using a principal component analysis or a weighted average based on GDPs.…”

Section: Review Of Relevant Literaturementioning

confidence: 91%

Oil price shocks and sectoral stocks in Nigeria: how relevant are asymmetry and structural breaks?

Fasanya

Adekoya

Ajayi

2022

IJESM

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Purpose This paper aims to model the relationship between oil price and stock returns for selected sectors in Nigeria using monthly data from January 2007 to December 2016. Design/methodology/approach The authors use both the linear (symmetric) autoregressive distributed lag (ARDL) by Pesaran et al. (2001) and non-linear (asymmetric) ARDL by Shin et al. (2014), and they also account for structural breaks using the Bai and Perron (2003) test that allows for multiple structural changes in regression models. Findings The results indicate that the strength of this relationship varies across sectors, albeit asymmetric and breaks. The authors identify two structural breaks that occur in 2008 and 2010/2011, which coincidentally correspond to the global financial crisis and the Arab spring (Libyan shutdowns), respectively. Moreover, the authors observe strong support for asymmetry and structural breaks for some sectors in the reaction of sector returns to movement in oil prices. These findings are robust and insensitive when considering different oil proxies. While further extensions can be pursued, the consideration of asymmetric effects as well as structural breaks should not be jettisoned when modelling this nexus. Originality/value This study is one of the very few studies that have investigated the sectoral behaviour of stocks to oil price shocks, particularly in Nigeria. This paper contributes to the oil stock literature using the recent technique of asymmetry and also considering the role structural breaks play in the relationship between oil price and stock returns.

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