Impact of Crude Oil Price Volatility on Southeast Asian Stock Returns

Abstract

The study investigates the connection between international oil indices and Southeast Asian stock markets. The outcomes confirm the significant oil-stock linkage in the Southeast Asian region. While the oil price fluctuations have positive effects on stock returns, the impacts of the implied crude oil volatility index are negative. The study further reports the existence of GARCH effects in investigated markets, with a greater effect of negative innovations compared to that of positive. Furthermore, the jump effects are found in most markets, as evidenced by the estimates for GARCH-jump models. Generally, the volatility driven by abnormal information positively affects the volatility of returns while the jump behavior has negative impacts on Southeast Asian market returns.