WTI OIL SHOCKS IN EASTERN EUROPEAN STOCK MARKETS: A VAR APPROACH
WTI OIL SHOCKS IN EASTERN EUROPEAN STOCK MARKETS: A VAR APPROACH

Author(s): Rui Dias, Hortense Santos, Paula Heliodore, Cristina Vasco, Paulo Alexandre
Subject(s): Social Sciences, Economy
Published by: Udruženje ekonomista i menadžera Balkana
Summary/Abstract: The 2020 Russia-Saudi Oil Price War was an economic war triggered in March 2020 by Saudi Arabia in response to Russia’s refusal to reduce oil production to keep oil prices at a moderate level. In view of these events, this study aims to analyze oil shocks (WTI) in the eastern European stock markets, namely the stock indices of Hungary (BUX), Croatia (CROBE), Russia (MOEX), Czech Republic (PRAGUE), Slovakia (SAX 16), Slovenia (SBI TOP), Bulgaria (SOFIX), from September 2019 to January 2021. The results show mostly structural breakdowns in March 2020, while the VAR Granger Causality/Block Exogeneity Wald Tests model shows two-way shocks between oil (WTI) and the stock markets analyzed. These findings show that the hypothesis of portfolio diversification may be called into question. As a final discussion, we consider that investors should avoid investments in stock markets, at least as long as this pandemic last, and rebalance their portfolios into assets considered “safe haven” for the purpose of mitigating risk and improving the efficiency of their portfolios.

• Details
• Contents