Does oil price variability affect the long memory and weak form efficiency of stock markets in top oil producers and oil Consumers? Evidence from an asymmetric MF-DFA approach

Yun-Jung Lee, Xuan Vinh Vo, Seong Min Yoon

Research output: Contribution to journalArticlepeer-review

28 Citations (Scopus)

Abstract

This study examines the asymmetric multifractality and the market efficiency of the stock markets in the countries that are the top crude oil producers (USA, KSA, Canada and Russia) and consumers (Brazil, China, India, and Japan) using an asymmetric multifractal detrended fluctuation analysis (A-MF-DFA) method. The results show evidence of an asymmetric multifractal nature for all markets. Moreover, the multifractality is stronger in the upward movement of the market returns, except in China. The degree of efficiency of the stock markets is shown to be time-varying and experienced a decrease during the 2008 global financial crisis (GFC), but an upside trend occurred during the recent oil price crash followed a significant decline during COVID-19. The stock markets have an anti-persistent feature during GFC and COVID-19, whereas they exhibit a long-term persistent feature during oil price crash. More interestingly, the efficiency of the stock markets of crude oil producers is lower in general than that of oil consumers. Furthermore, the efficiency of the stock market is lower in the downward movement of the market returns than in the upward movement. Asymmetry and oil price uncertainty index are the key driver of the stock markets and can serve as predictor of the stock market dynamics of top oil producers and top oil consumers particularly during COVID-19 and oil price crash.

Original languageEnglish
Article number101446
JournalNorth American Journal of Economics and Finance
Volume57
DOIs
Publication statusPublished - 2021

Keywords

  • Asymmetric MF-DFA analysis
  • Efficient market hypothesis
  • Hurst exponent
  • Oil uncertainty index
  • Top oil producer and oil consumer

ASJC Scopus subject areas

  • Economics and Econometrics
  • Finance

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