Quantitative Analysis of Stock Market Resilience during Oil Price Shocks: Evidence from seven Middle East Countries

Rezaei Soufi, Hojat; Esfahanipour, Akbar; Akbarpour Shirazi, Mohsen; Aghajani, Sepideh

doi:10.24200/sci.2024.62924.8108

Quantitative Analysis of Stock Market Resilience during Oil Price Shocks: Evidence from seven Middle East Countries

Articles in Press

Document Type : Research Article

Authors

Hojat Rezaei Soufi ¹

Akbar Esfahanipour ²

Mohsen Akbarpour Shirazi ²

Sepideh Aghajani ³

¹ Central Bank of Iran and Amirkabir University of Technology, Tehran, Iran.

² Department of Industrial Engineering & Management Systems, Amirkabir University of Technology, Tehran, Iran.

³ Department of Industrial Engineering, Alzahra University, Tehran, Iran.

10.24200/sci.2024.62924.8108

Abstract

This study develops a quantitative approach to evaluate the resilience of stock markets of oil-supplying countries. To this point, the data from the stock market of seven Middle East countries are used, the shock periods are identified, an initial form of resilience is developed, and the performance of stock markets based on the oil price systemic risk is modified. Since during the disaster period, the pattern of changes in the financial markets is very important, a new approach to evaluate the amount of performance reduction after the disaster and recovering to the pre-disaster point is proposed. The proper performance of the proposed approach in showing the resilience of stock markets in different time steps has been evaluated quantitatively and qualitatively and the main policy of countries are reviewed. Our results indicate a positive and significant impact of the oil price shock on all stock markets, while the resilience of the best stock market is 20% higher than the worst market. Also, our introduced correction factor for the resilience measure has been able to provide a more realistic view of the resilience, as shown in the comparison of the resilience of countries and their economic indicators.

Keywords

Oil price shock

Stock market resilience

Systemic risk

Performance reduction

Recovery

Subjects