The relationship between oil price shocks and stock market prices in the BRICs

Abstract

The oil commodity has grown to become the largest commodity worldwide. This intrigued many researchers to analyse the effect of oil price shocks on developed economies, however little research was carried out on emerging economies. This dissertation recognises the importance of the emerging economies, in particular the BRIC economies, and as a result attempts to measure the effect that oil price shocks might have on the BRIC stock market prices. This study considers three oil commodity benchmarks, which are used to explain the effect on the BRIC economies, creating twelve candidate models. The best model for each BRIC economy was chosen to represent the effect of the oil commodity against the BRICs. Using the OLS estimation technique, the results obtained suggest that although the T-Stat is high, oil price shocks do not have a significant impact on the stock prices in the BRIC economies.