The impact of energy prices on stock returns in selected Central and Eastern European countries

Marți, 14 Mai 2024 – ora 16:35 – sala 3M4 (etaj 1, clădirea Moxa)

Robert Grecu

Bucharest University of Economic Studies, robertgrecu@yahoo.com

The aim of this paper is to illustrate the connection between the energy sector and the capital market, specifically how changes in energy prices, such as oil and gas, influence the returns of stocks in different economic sectors. The analysis was carried out at the level of five countries from Central and Eastern Europe that are included in the same peer group from an economic development perspective. Even though the economic model of these countries is similar, the results of the analysis show that the impact of energy prices on the capital market differs significantly from one state to another. Another important aspect observed in the results is that the impact of energy prices tends to have a different magnitude on the stock prices of companies from different industries. Thus, the analysis determined the industries for which financial assets are very sensitive to energy prices, compared to the industries for which other determining factors influence capital market movements. From a quantitative perspective, the paper studies, on the one hand, the co-movement between variables, and, on the other, the impact of several types of shocks in a VAR framework. Moreover, we focused the analysis on the dynamic links between energy and stock markets; in this sense, models such as Dynamic Conditional Correlation (GARCH) and Time-Varying Parameter (VAR) were applied.

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