TY - JOUR
T1 - Quantile spillovers and connectedness analysis between oil and African stock markets
AU - Mensi, Walid
AU - Vo, Xuan Vinh
AU - Kang, Sang Hoon
N1 - Publisher Copyright:
© 2023 Economic Society of Australia, Queensland
PY - 2023/6
Y1 - 2023/6
N2 - This study examines the spillovers and connectedness between oil and the African stock markets under bearish, normal, and bullish market conditions. Using the quantile connectedness method, we find higher spillovers under bearish market conditions than in both tranquil and bullish market conditions. Oil is a net transmitter of spillovers in the African markets. Furthermore, Ghana, Kenya, Nigeria, and South Africa are net receivers of spillovers, and Tunisia, Egypt, Morocco, and Mauritius are net transmitters of spillovers in the lower quantile. In the median quantile, Ghana shifts to being a net transmitter of spillovers, whereas Egypt becomes a net receiver of spillovers. In the upper quantiles, all markets are net transmitters of spillovers, except for Mauritius and Egypt. We find a strong connectedness between oil and the Nigerian market during bearish and tranquil market conditions which alleviates the bullish market scenario. Moreover, spillovers reached the maximum level in early 2020, corresponding to the first wave of the COVID-19 pandemic. The portfolio analysis shows that an optimally weighted portfolio offers the best downside risk for all markets. The hedged portfolio offers the best risk reduction for all economies.
AB - This study examines the spillovers and connectedness between oil and the African stock markets under bearish, normal, and bullish market conditions. Using the quantile connectedness method, we find higher spillovers under bearish market conditions than in both tranquil and bullish market conditions. Oil is a net transmitter of spillovers in the African markets. Furthermore, Ghana, Kenya, Nigeria, and South Africa are net receivers of spillovers, and Tunisia, Egypt, Morocco, and Mauritius are net transmitters of spillovers in the lower quantile. In the median quantile, Ghana shifts to being a net transmitter of spillovers, whereas Egypt becomes a net receiver of spillovers. In the upper quantiles, all markets are net transmitters of spillovers, except for Mauritius and Egypt. We find a strong connectedness between oil and the Nigerian market during bearish and tranquil market conditions which alleviates the bullish market scenario. Moreover, spillovers reached the maximum level in early 2020, corresponding to the first wave of the COVID-19 pandemic. The portfolio analysis shows that an optimally weighted portfolio offers the best downside risk for all markets. The hedged portfolio offers the best risk reduction for all economies.
KW - African markets
KW - Oil
KW - Quantiles
KW - Spillovers
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U2 - 10.1016/j.eap.2023.02.002
DO - 10.1016/j.eap.2023.02.002
M3 - Article
AN - SCOPUS:85150037522
SN - 0313-5926
VL - 78
SP - 60
EP - 83
JO - Economic Analysis and Policy
JF - Economic Analysis and Policy
ER -