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Dynamic causality between oil prices and stock market indexes in Russia and China: does US financial instability matter?

Amal Ghedira (ISIG Kairouan, University of Kairouan, Kairouan, Tunisia)
Mohamed Sahbi Nakhli (ISIG Kairouan, University of Kairouan, Kairouan, Tunisia) (LaREMFIQ Laboratory, University of Sousse, Sousse, Tunisia)

International Journal of Emerging Markets

ISSN: 1746-8809

Article publication date: 28 February 2023




This study aims to examine the dynamic bidirectional causality between oil price (OIL) and stock market indexes in net oil-exporting (Russia) and net oil-importing (China) countries.


The authors use monthly data for the period starting from October 1995 to October 2021. In this study, the bootstrap rolling-window Granger causality approach introduced by Balcilar et al. (2010) and the probit regression model are performed in order to identify the bidirectional causality.


The results show that the causal periods mainly occur during economic, financial and health crises. For oil-exporting country, the results suggest that any increase (decrease) in the OIL leads to an appreciation (depreciation) in the stock market index. The effect of the stock market on OIL is more relevant for the oil-importing country than that for the oil-exporting one. The COVID-19 consequences are demonstrated in the impact of oil on the Russian stock market. The probit regression shows that the US financial instabilities increase the probability of causality between OIL and stock market indexes in Russia and China.

Practical implications

The dynamic relationship between the variables must be taken into account in investment decisions. As financial instabilities in the USA drive the relationship between oil and stocks, investors should consider geopolitical, economic and financial elements when constructing their portfolios. Shareholders are required to include other assets in their portfolios since oil–stock relationship is highly risky.


This study provides further evidence of the bidirectional oil–stock causal link. Additionally, it examines the impact of financial instabilities on the probability that the OIL and the stock market index cause each other through the Granger effect.



Ghedira, A. and Nakhli, M.S. (2023), "Dynamic causality between oil prices and stock market indexes in Russia and China: does US financial instability matter?", International Journal of Emerging Markets, Vol. ahead-of-print No. ahead-of-print.



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