The purpose of this paper is to study the impact of oil and energy price changes on a set of De-veloped as well as Emerging Stock Market returns. This study employs an international multi-factor model which allows for both unconditional and conditional risk factors, and it’s contribu-tion to the literature is the fact that we use the modified framework proposed by Kilian (2008a), in which we decompose oil price changes into three components, namely oil-supply shocks, glob-al oil-demand shocks, and oil-market specific shocks, in order to investigate the relationship be-tween oil price risk and the returns of various Stock Markets. Furthermore, this paper is meant to shed light on the possible asymmetric impact of risk between emerging and developed markets.
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