Oil prices, return on financial assets and economic confidence in Russia, India and China

Abstract

Aim. To study the effect of oil price on stock returns and economic sentiment in Russia, India and China from January 2000 to December 2022.Objectives. To review publications in the context of the research topic, draw key conclusions and identify gaps and shortcomings, reflecting them in a table; to identify variables at the heart of econometric calculations; to present empirical results based on econometric models.Methods. The study of the relationship between oil prices, stock returns and economic confidence in Russia, India and China was conducted using reliable and relevant data. The data frequency is monthly, covers the period from January 2000 to December 2022 and includes oil prices, stock market indices and economic confidence indices. The authors applied the econometric models MSIAH(3)-VARX(3) and MSIA(3)-VARX(3).Results. Oil prices have a significant impact on stock returns as well as economic sentiment in the three countries under study. It is found that for China and India, oil prices affect economic sentiment as well as market returns, but for Russia, the above factors are influenced by different regimes, thus demonstrating that Russia is among the leading oil exporting countries.Conclusions. The results obtained in the paper are useful for investors and policy makers as they demonstrate the existence of regime-dependent effects and suggest that this information is important when designing economic policies or investment plans. The paper emphasizes the importance of oil price in determining economic and financial conditions in key emerging markets.