The effect of oil price shocks on the stock market returns of selected oil exporting countries (variable parameter regression approach over time)

TThe present study examines the effect of oil price shocks on the returns of selected stocks from oil exporting countries using a two-stage method based on the structural vector autoregression model ( SVAR)and time-varying parameter regression models( TVP).The used data in this study are from the following countries, Iran,UAE, Qatar, Saudi Arabia, Kuwait, Algeria, Venezuela which are OPEC member countries, Russia, Mexico and Bahrain from OPEC+member countries in the form of two monthly time series data, including oil market and stock market data from 2000 to 2021.Oil prices have been studied by separating supply and demand shocks. The results report evidence of the time-varying response of stock market returns to different oil shocks ( oil supply, aggregate demands, and demand shocks) .It shows that stock returns react to demand shocks more than supply shocks. In addition, the effect of supply shocks on stock returns is negative and small while the total demand shock has a positive effect on the stock market of the countries rather than Iran and Algeria. It also indicates that oil demand shocks have positive effects on the countries like Russia, Qatar and Mexico, but they are also less powerful than the total demand. At the same time, this shock has a negative effect at the beginning of the studied periods for the countries like Algeria,UAE, Iran as well as Saudi Arabia. It should be noted that, it has no significant effect in other periods.