Author(s): Swamy Perumandla
The purpose of this paper is to examine the dynamic relationship between oil price shocks and the returns of stock markets in both G7 and BRICS nations. The authors employ Quantile Regression Analysis, and two asymmetric GARCH models, namely the exponential GARCH and the threshold GARCH. This study examines the impact of oil price changes on stock market index returns, considering both symmetric and asymmetric impacts across three distinct market circumstances. Overall, the findings reveal that an investigation of the shock's origin plays a crucial role in determining the time-varying link between oil prices and stock markets. Price shocks have a substantial impact on the stock returns of many G7 and BRICS nations. In this study, the authors demonstrate the significance of oil's role as a catalyst for return dynamics of both G7 and BRICS countries’ stock markets and the analysis of time-varying relationships in investment decision-making. The authors assert that it is crucial to recognize the significant impact of COVID-19 shocks on oil prices alongside shocks relating to oil when examining the dynamics of oil prices and stock returns.