Oil prices and MENA stock markets: new evidence from nonlinear and asymmetric causalities during and after the crisis period

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Abstract:

This article investigates the potential of nonlinear causal relationships between world oil prices and stock markets in Middle East and North Africa (MENA) countries during a black swan period that is characterized by rarity and devastating impacts. Our study is carried out using the daily data for 11 MENA countries over the period from 2 July 2007 to 27 August 2012. By using the nonlinear and asymmetric causality test of Kyrtsou and Labys (2006), we mainly find that: (i) the oil prices and MENA stock markets interact in a nonlinear manner; (ii) the signs of changes in the causing variables are important for detecting the true causality links between the variables and (iii) the nonlinear causality is more pronounced in the case of the Brent than West Texas Intermediate oil prices.

Keywords: C52; G15; MENA countries; Q43; nonlinear causality; oil prices; stock markets

Document Type: Research Article

DOI: http://dx.doi.org/10.1080/00036846.2014.896987

Affiliations: 1: College of Science and Humanities in Slayel, Salman bin Abdulaziz University, Slayel, Saudi Arabia 2: Ecole Supérieure de Commerce de Tunis, Université de la Manouba, Manouba, Tunisia 3: LeBow College of Business, Drexel University, Philadelphia, PA, USA 4: IPAG Lab, IPAG Business School, Paris, France

Publication date: June 23, 2014

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