Research Article
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The effect of oil price on stock market performance and petrochemical stock value using NARDL

Year 2024, Volume: 6 Issue: 1, 25 - 33, 19.05.2024
https://doi.org/10.58251/ekonomi.1430729

Abstract

The aim of the study is to examine the impact of oil prices on the stock market performance and the stock value of petrochemical companies on the Tehran Stock Exchange (TSE). For this, it utilizes the Non-linear autoregressive distributed lag during 2011 to 2021 using time series data with monthly frequency. The results showed that in the short run, the oil price has an asymmetric impact on the stock value of petrochemical industries and also on the performance of the stock market, while in the long run, this effect is symmetrical. So, the influence of bouncing up the oil price is greater than the impact of its moving down. Then, the asymmetric effect happens through the increase in oil prices. Therefore, ups and downs in oil prices lead to fluctuations in the stock market returns, especially in petrochemical companies. Based on the results, capital market participants should watch the informational content of oil price fluctuations to make buying and selling decisions and invest in companies' shares according to these fluctuations.





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Supporting Institution

This study is part of the master's thesis research work.

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Thank you for your cooperation

References

  • Alzyadat, JA., Abuhommous, AAA., & Alqaralleh, H. (2021). Testing the conditional volatility of saudi arabia stock market: Symmetric and asymmetric autoregressive conditional heteroskedasticity (GARCH) approach. Academy of Accounting and Financial Studies, 25(2), 1-9.
  • Alvarado, R. et al. (2022a). Impact of the informal economy on the ecological footprint: the role of urban concentration and globalization. Economic Analysis and Policy, 75, 750-767.
  • Alvarado, R. et al. (2022b). Biocapacity convergence clubs in Latin America: an analysis of their determining factors using quantile regressions. Environmental Science and Pollution Research, 29(44), 66605-66621.
  • Altunöz, U. (2023). Analyzing the volatility spillover and cointegration relationship between daily spot West Texas intermediate crude oil price and US dollar. Journal of Ekonomi, 5(1), 3-3.
  • Amiri, H., Sayadi, M., & Mamipour, S. (2021). Oil Price Shocks and Macroeconomic Outcomes; Fresh Evidences from a scenario-based NK-DSGE analysis for oil-exporting countries. Resources Policy, 74, 102262. https://doi.org/10.1016/j.resourpol.2021.102262 .
  • Arouri, M. E. H., & Rault, C. (2012). Oil prices and stock markets in GCC countries: empirical evidence from panel analysis. International Journal of Finance & Economics, 17(3), 242-253.
  • Bhar, R., & Nikolova, B. (2009). Oil prices and equity returns in the BRIC countries. World Economy, 32(7), 1036-1054. https://doi.org/10.1111/j.1467-9701.2009.01194.x .
  • Bird, R., Reddy, K., & Yeung, D. (2014). The relationship between uncertainty and the market reaction to information: Is it influenced by stock-specific characteristics?. International journal of behavioural accounting and finance, 4(2), 113-132.
  • Bouri, E. (2015). Return and volatility linkages between oil prices and the Lebanese stock market in crisis periods. Energy, 89, 365-371. https://doi.org/10.1016/j.energy.2015.05.121 .
  • Cheikh, N. B., Naceur, S. B., Kanaan, O., & Rault, C. (2021). Investigating the asymmetric impact of oil prices on GCC stock markets. Economic Modelling, 102, 105589.
  • Ciner, C. (2013). Oil and stock returns: Frequency domain evidence. International Financial Markets, Institutions and Money, 23, 1-11.
  • Cui, X. et al. (2024). Do geopolitical risk and economic policy uncertainty cause CO2 emissions in BRICS? The role of institutional quality and energy productivity. Stochastic Environmental Research and Risk Assessment, 1-15.
  • Cunado, J., & de Gracia, F. P. (2014). Oil price shocks and stock market returns: Evidence for some European countries. Energy Economics, 42, 365-377.
  • Deng, Q.S. et al. (2022). Asymmetric impacts of foreign direct investment inflows, financial development, and social globalization on environmental pollution. Economic Analysis and Policy, 76, 236-251.
  • Dizaji, S. F. (2014). The effects of oil shocks on government expenditures and government revenues nexus (with an application to Iran's sanctions). Economic Modelling, 40, 299-313.
  • Dogru, T. et al. (2023). Employee turnover dynamics in the hospitality industry vs. the overall economy. Tourism Management, 99, 104783.
  • Ebrahimi, M., & Shokri, N. (2012). Asymmetric Effects of Oil Price Shock on the Stock Price Index: Comparison of Bootstrap Confidence lag in Impulse Response Function. Journal of Applied Economics Studies in Iran 1(2), 115–44.
  • Fang, W., Lai, Y., & Miller, S. M. (2009). Does exchange rate risk affect exports asymmetrically? Asian evidence. Journal of International money and Finance, 28(2), 215-239.
  • Granger, C. W., & Yoon, G. (2002). Hidden cointegration. University of California, Economics Working Paper.
  • Han, J. et al. (2023a). General equilibrium model-based green finance, decarbonization and high-quality economic development: a new perspective from knowledge networks. Environment, Development and Sustainability, 1-36.
  • Han, J. et al. (2023b). The construction of green finance and high-quality economic development under China’s SDGs target. Environmental Science and Pollution Research, 30(52), 111891-111902.
  • Hassanzadeh, A., & Kianvand, M. (2014). The Impact of Symmetric and Asymmetric Oil Shocks on the Total Price Index in the Tehran Stock Exchange Market. Monetary & Financial Economics, 21(8), 30–61. https://doi.org/10.22067/pm.v21i8.45852 .
  • Hosseini, S. M., & Dadras Moghadam, A. (2022). Identification and impact of monetary and financial shocks on the stock returns and stock industries of the country. Journal of Iranian Economic Issues, 9(1), 125–159. https://doi.org/10.30465/ce.2022.40994.1777 .
  • Işık, C., Ongan, S., Islam, H., Jabeen, G., & Pinzon, S. (2024a). Is economic growth in East Asia pacificand South Asia ESG factors based and aligned growth? Sustainable Development, 1–14.https://doi.org/10.1002/sd.2910.
  • Işık, C., Ongan, S., Ozdemir, D., Jabeen, G., Sharif, A., Alvarado, R., ... & Rehman, A. (2024b). Renewable energy, climate policy uncertainty, industrial production, domestic exports/re-exports, and CO2 emissions in the USA: a SVAR approach. Gondwana Research, 127, 156-164.
  • Işık, C., Simionescu, M., Ongan, S., Radulescu, M., Yousaf, Z., Rehman, A., ... & Ahmad, M. (2023). Renewable energy, economic freedom and economic policy uncertainty: New evidence from a dynamic panel threshold analysis for the G-7 and BRIC countries. Stochastic Environmental Research and Risk Assessment, 1-16.
  • Işık, C., Ahmad, M., Ongan, S., Ozdemir, D., Irfan, M., & Alvarado, R. (2021). Convergence analysis of the ecological footprint: theory and empirical evidence from the USMCA countries. Environmental Science and Pollution Research, 28, 32648-32659.
  • Işık, C., Sirakaya-Turk, E., & Ongan, S. (2020). Testing the efficacy of the economic policy uncertainty index on tourism demand in USMCA: Theory and evidence. Tourism Economics, 26(8), 1344-1357.
  • Islam, H., Rahman, J., Tanchangya, T., & Islam, M. A. (2023). Impact of firms’ size, leverage, and net profit margin on firms’ profitability in the manufacturing sector of Bangladesh: An empirical analysis using GMM estimation. Journal of Ekonomi, 5(1), 1-9.
  • Khan, K., Su, C. W., & Tao, R. (2021). Does oil prices cause financial liquidity crunch? Perspective from geopolitical risk. Defence and Peace Economics, 32(3), 312-324. https://doi.org/10.1080/10242694.2020.1712640.
  • Koop, G. (2013). Analysis of economic data. John Wiley & Sons.
  • Liu, F., Shao, S., & Zhang, C. (2020). How do China's petrochemical markets react to oil price jumps? A comparative analysis of stocks and commodities. Energy Economics, 92, 104979.
  • Mabna Financial Data Processing (2023). Rahavard-Navin database. https://mabnadp.com/products/rahavard-novin.
  • Mohammadi, M., Farahani, M. & Rezaei Assal, R. (2021), study of the effect of oil price and its fluctuations on the asset returns of companies listed in the chemical and refining industry of Tehran Stock Exchange. Accounting and Management Perspectives Quarterly, 4(43), 34-48.
  • Mohanty, S., Nandha, M., & Bota, G. (2010). Oil shocks and stock returns: The case of the Central and Eastern European (CEE) oil and gas sectors. Emerging Markets Review, 11(4), 358-372.
  • Monjazab, M. R, & Nosrati, R. (2018), Advanced econometric models with EViews and Stata. Mehraban Book Publications, Tehran, Iran.
  • Morley, B., & Pentecost, E. J. (2000). Common trends and cycles in G-7 countries exchange rates and stock prices. Applied Economics Letters, 7(1), 7-10.
  • Nusair, S. A. (2016). The effects of oil price shocks on the economies of the Gulf Co-operation Council countries: Non-linear analysis. Energy Policy, 91, 256-267.
  • Okere, K. I., Obumneke B. M., & Favour C. O. (2021). “Symmetric and Asymmetric Effects of Crude Oil Price and Exchange Rate on Stock Market Performance in Nigeria: Evidence from Multiple Structural Break and NARDL Analysis.” The Journal of International Trade & Economic Development 30(6): 930–56.
  • Ongan, S. et al. (2022). Retesting the EKC hypothesis through transmission of the ARMEY curve model: an alternative composite model approach with theory and policy implications for NAFTA countries. Environmental Science and Pollution Research, 29(31), 46587-46599.
  • Pasigai, A., & Jusriadi, E. (2024). The influence of service strategies and business relations on the growth of starup businesses in medium digital marketing. Journal of Ekonomi, 6(1), 18-24.
  • Paytakhti Oskooe, S. A., & Shafei, E. (2016). “The Effect of Oil Price Fluctuations on the Stock Prices Index’s Changes in Iran: Structural VAR Approach”. Quarterly Energy Economics Review (QEER) 11(47): 205–40.
  • Phan, D. H. B., Sharma, S. S., & Narayan, P. K. (2015). Oil price and stock returns of consumers and producers of crude oil. Journal of International Financial Markets, Institutions and Money, 34, 245-262.
  • Rana, M., Al Mamun, A., Hossain, M. K., & Islam, H. (2024). Exploring the dynamics of Bangladesh bank's monetary policy: A factor analysis approach. Journal of Ekonomi, 6(1), 1-17.
  • Samadi, S., Shirani Fakhr, Z., & Davarzadeh, M. (2007). Investigating the Influence of World Price of Gold and Oil on the Tehran Stock Exchange Index: Modelling and Forecasting. Quarterly Journal of Quantitative Economics, 4(2), 25–51.
  • Sardar, N., & Sharma, S. (2022). Oil prices & stock returns: modeling the asymmetric effects around the zero lower bound. Energy Economics, 107, 105814.
  • Sümerli Sarıgül, S, Ünlü, M., Avcı, P., & Yaşar, E. (2023). The empirical analysis of cereal production under the climate exchange and examining the effects of banks’ domestic credit on cereal production: Evidence from Turkey. Journal of Ekonomi, 5(2).
  • Talebloo, R., Faridzad, A., & Sheikhi Habil, H. (2017). The Impact of Macroeconomic Variables on Chemical and Petrochemical Companies Stock Return in the Framework of PVAR. Journal of Econometric Modelling, 2(3), 159–186. https://doi.org/10.22075/jem.2018.13077.1102 .
  • Tehran Securities Exchange. (2023). Indices/TEDPIX. https://old.tse.ir/en/
Year 2024, Volume: 6 Issue: 1, 25 - 33, 19.05.2024
https://doi.org/10.58251/ekonomi.1430729

Abstract

References

  • Alzyadat, JA., Abuhommous, AAA., & Alqaralleh, H. (2021). Testing the conditional volatility of saudi arabia stock market: Symmetric and asymmetric autoregressive conditional heteroskedasticity (GARCH) approach. Academy of Accounting and Financial Studies, 25(2), 1-9.
  • Alvarado, R. et al. (2022a). Impact of the informal economy on the ecological footprint: the role of urban concentration and globalization. Economic Analysis and Policy, 75, 750-767.
  • Alvarado, R. et al. (2022b). Biocapacity convergence clubs in Latin America: an analysis of their determining factors using quantile regressions. Environmental Science and Pollution Research, 29(44), 66605-66621.
  • Altunöz, U. (2023). Analyzing the volatility spillover and cointegration relationship between daily spot West Texas intermediate crude oil price and US dollar. Journal of Ekonomi, 5(1), 3-3.
  • Amiri, H., Sayadi, M., & Mamipour, S. (2021). Oil Price Shocks and Macroeconomic Outcomes; Fresh Evidences from a scenario-based NK-DSGE analysis for oil-exporting countries. Resources Policy, 74, 102262. https://doi.org/10.1016/j.resourpol.2021.102262 .
  • Arouri, M. E. H., & Rault, C. (2012). Oil prices and stock markets in GCC countries: empirical evidence from panel analysis. International Journal of Finance & Economics, 17(3), 242-253.
  • Bhar, R., & Nikolova, B. (2009). Oil prices and equity returns in the BRIC countries. World Economy, 32(7), 1036-1054. https://doi.org/10.1111/j.1467-9701.2009.01194.x .
  • Bird, R., Reddy, K., & Yeung, D. (2014). The relationship between uncertainty and the market reaction to information: Is it influenced by stock-specific characteristics?. International journal of behavioural accounting and finance, 4(2), 113-132.
  • Bouri, E. (2015). Return and volatility linkages between oil prices and the Lebanese stock market in crisis periods. Energy, 89, 365-371. https://doi.org/10.1016/j.energy.2015.05.121 .
  • Cheikh, N. B., Naceur, S. B., Kanaan, O., & Rault, C. (2021). Investigating the asymmetric impact of oil prices on GCC stock markets. Economic Modelling, 102, 105589.
  • Ciner, C. (2013). Oil and stock returns: Frequency domain evidence. International Financial Markets, Institutions and Money, 23, 1-11.
  • Cui, X. et al. (2024). Do geopolitical risk and economic policy uncertainty cause CO2 emissions in BRICS? The role of institutional quality and energy productivity. Stochastic Environmental Research and Risk Assessment, 1-15.
  • Cunado, J., & de Gracia, F. P. (2014). Oil price shocks and stock market returns: Evidence for some European countries. Energy Economics, 42, 365-377.
  • Deng, Q.S. et al. (2022). Asymmetric impacts of foreign direct investment inflows, financial development, and social globalization on environmental pollution. Economic Analysis and Policy, 76, 236-251.
  • Dizaji, S. F. (2014). The effects of oil shocks on government expenditures and government revenues nexus (with an application to Iran's sanctions). Economic Modelling, 40, 299-313.
  • Dogru, T. et al. (2023). Employee turnover dynamics in the hospitality industry vs. the overall economy. Tourism Management, 99, 104783.
  • Ebrahimi, M., & Shokri, N. (2012). Asymmetric Effects of Oil Price Shock on the Stock Price Index: Comparison of Bootstrap Confidence lag in Impulse Response Function. Journal of Applied Economics Studies in Iran 1(2), 115–44.
  • Fang, W., Lai, Y., & Miller, S. M. (2009). Does exchange rate risk affect exports asymmetrically? Asian evidence. Journal of International money and Finance, 28(2), 215-239.
  • Granger, C. W., & Yoon, G. (2002). Hidden cointegration. University of California, Economics Working Paper.
  • Han, J. et al. (2023a). General equilibrium model-based green finance, decarbonization and high-quality economic development: a new perspective from knowledge networks. Environment, Development and Sustainability, 1-36.
  • Han, J. et al. (2023b). The construction of green finance and high-quality economic development under China’s SDGs target. Environmental Science and Pollution Research, 30(52), 111891-111902.
  • Hassanzadeh, A., & Kianvand, M. (2014). The Impact of Symmetric and Asymmetric Oil Shocks on the Total Price Index in the Tehran Stock Exchange Market. Monetary & Financial Economics, 21(8), 30–61. https://doi.org/10.22067/pm.v21i8.45852 .
  • Hosseini, S. M., & Dadras Moghadam, A. (2022). Identification and impact of monetary and financial shocks on the stock returns and stock industries of the country. Journal of Iranian Economic Issues, 9(1), 125–159. https://doi.org/10.30465/ce.2022.40994.1777 .
  • Işık, C., Ongan, S., Islam, H., Jabeen, G., & Pinzon, S. (2024a). Is economic growth in East Asia pacificand South Asia ESG factors based and aligned growth? Sustainable Development, 1–14.https://doi.org/10.1002/sd.2910.
  • Işık, C., Ongan, S., Ozdemir, D., Jabeen, G., Sharif, A., Alvarado, R., ... & Rehman, A. (2024b). Renewable energy, climate policy uncertainty, industrial production, domestic exports/re-exports, and CO2 emissions in the USA: a SVAR approach. Gondwana Research, 127, 156-164.
  • Işık, C., Simionescu, M., Ongan, S., Radulescu, M., Yousaf, Z., Rehman, A., ... & Ahmad, M. (2023). Renewable energy, economic freedom and economic policy uncertainty: New evidence from a dynamic panel threshold analysis for the G-7 and BRIC countries. Stochastic Environmental Research and Risk Assessment, 1-16.
  • Işık, C., Ahmad, M., Ongan, S., Ozdemir, D., Irfan, M., & Alvarado, R. (2021). Convergence analysis of the ecological footprint: theory and empirical evidence from the USMCA countries. Environmental Science and Pollution Research, 28, 32648-32659.
  • Işık, C., Sirakaya-Turk, E., & Ongan, S. (2020). Testing the efficacy of the economic policy uncertainty index on tourism demand in USMCA: Theory and evidence. Tourism Economics, 26(8), 1344-1357.
  • Islam, H., Rahman, J., Tanchangya, T., & Islam, M. A. (2023). Impact of firms’ size, leverage, and net profit margin on firms’ profitability in the manufacturing sector of Bangladesh: An empirical analysis using GMM estimation. Journal of Ekonomi, 5(1), 1-9.
  • Khan, K., Su, C. W., & Tao, R. (2021). Does oil prices cause financial liquidity crunch? Perspective from geopolitical risk. Defence and Peace Economics, 32(3), 312-324. https://doi.org/10.1080/10242694.2020.1712640.
  • Koop, G. (2013). Analysis of economic data. John Wiley & Sons.
  • Liu, F., Shao, S., & Zhang, C. (2020). How do China's petrochemical markets react to oil price jumps? A comparative analysis of stocks and commodities. Energy Economics, 92, 104979.
  • Mabna Financial Data Processing (2023). Rahavard-Navin database. https://mabnadp.com/products/rahavard-novin.
  • Mohammadi, M., Farahani, M. & Rezaei Assal, R. (2021), study of the effect of oil price and its fluctuations on the asset returns of companies listed in the chemical and refining industry of Tehran Stock Exchange. Accounting and Management Perspectives Quarterly, 4(43), 34-48.
  • Mohanty, S., Nandha, M., & Bota, G. (2010). Oil shocks and stock returns: The case of the Central and Eastern European (CEE) oil and gas sectors. Emerging Markets Review, 11(4), 358-372.
  • Monjazab, M. R, & Nosrati, R. (2018), Advanced econometric models with EViews and Stata. Mehraban Book Publications, Tehran, Iran.
  • Morley, B., & Pentecost, E. J. (2000). Common trends and cycles in G-7 countries exchange rates and stock prices. Applied Economics Letters, 7(1), 7-10.
  • Nusair, S. A. (2016). The effects of oil price shocks on the economies of the Gulf Co-operation Council countries: Non-linear analysis. Energy Policy, 91, 256-267.
  • Okere, K. I., Obumneke B. M., & Favour C. O. (2021). “Symmetric and Asymmetric Effects of Crude Oil Price and Exchange Rate on Stock Market Performance in Nigeria: Evidence from Multiple Structural Break and NARDL Analysis.” The Journal of International Trade & Economic Development 30(6): 930–56.
  • Ongan, S. et al. (2022). Retesting the EKC hypothesis through transmission of the ARMEY curve model: an alternative composite model approach with theory and policy implications for NAFTA countries. Environmental Science and Pollution Research, 29(31), 46587-46599.
  • Pasigai, A., & Jusriadi, E. (2024). The influence of service strategies and business relations on the growth of starup businesses in medium digital marketing. Journal of Ekonomi, 6(1), 18-24.
  • Paytakhti Oskooe, S. A., & Shafei, E. (2016). “The Effect of Oil Price Fluctuations on the Stock Prices Index’s Changes in Iran: Structural VAR Approach”. Quarterly Energy Economics Review (QEER) 11(47): 205–40.
  • Phan, D. H. B., Sharma, S. S., & Narayan, P. K. (2015). Oil price and stock returns of consumers and producers of crude oil. Journal of International Financial Markets, Institutions and Money, 34, 245-262.
  • Rana, M., Al Mamun, A., Hossain, M. K., & Islam, H. (2024). Exploring the dynamics of Bangladesh bank's monetary policy: A factor analysis approach. Journal of Ekonomi, 6(1), 1-17.
  • Samadi, S., Shirani Fakhr, Z., & Davarzadeh, M. (2007). Investigating the Influence of World Price of Gold and Oil on the Tehran Stock Exchange Index: Modelling and Forecasting. Quarterly Journal of Quantitative Economics, 4(2), 25–51.
  • Sardar, N., & Sharma, S. (2022). Oil prices & stock returns: modeling the asymmetric effects around the zero lower bound. Energy Economics, 107, 105814.
  • Sümerli Sarıgül, S, Ünlü, M., Avcı, P., & Yaşar, E. (2023). The empirical analysis of cereal production under the climate exchange and examining the effects of banks’ domestic credit on cereal production: Evidence from Turkey. Journal of Ekonomi, 5(2).
  • Talebloo, R., Faridzad, A., & Sheikhi Habil, H. (2017). The Impact of Macroeconomic Variables on Chemical and Petrochemical Companies Stock Return in the Framework of PVAR. Journal of Econometric Modelling, 2(3), 159–186. https://doi.org/10.22075/jem.2018.13077.1102 .
  • Tehran Securities Exchange. (2023). Indices/TEDPIX. https://old.tse.ir/en/
There are 49 citations in total.

Details

Primary Language English
Subjects Cyclical Fluctuations, Capital Market
Journal Section Research Articles
Authors

Mohammad Amri-asrami 0000-0003-2438-5390

Elahe Ebadi Jamkhane 0000-0001-9120-329X

Publication Date May 19, 2024
Submission Date February 2, 2024
Acceptance Date March 1, 2024
Published in Issue Year 2024 Volume: 6 Issue: 1

Cite

APA Amri-asrami, M., & Ebadi Jamkhane, E. (2024). The effect of oil price on stock market performance and petrochemical stock value using NARDL. Journal of Ekonomi, 6(1), 25-33. https://doi.org/10.58251/ekonomi.1430729

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