Asymmetric effect of oil prices on stock market prices: New evidence from oil-exporting and oil-importing countries

Abstract This paper examines the short-run and long-run effect of oil prices across bullish, bearish, and normal states of the stock markets in oil-exporting and oil-importing countries where oil-exporting countries include Russia, Mexico, Venezuela, and Norway and oil-importing countries include India, China, Japan and Norway. For this purpose, we use quantile ARDL model and compare its findings with the standard nonlinear ARDL model. Moreover, this study uses quantile nonlinear ARDL model where oil price series is decomposed into positive and negative oil price shocks. The nonlinear ARDL estimates do not support co-integration in the long-run whereas, in the short-run, it supports asymmetric effect in all countries except Norway. Besides, the quantile ARDL estimates indicate that oil prices asymmetrically affect stock prices both in the short-run and long-run and for all sample countries. Finally, the empirical estimates of the quantile nonlinear ARDL model are consistent with the estimates from the quantile ARDL model. The findings of this study provide important policy implications for investors, policymakers and other stakeholders.