How does Volatility in Oil Prices Affect Stock Markets in Emerging Economies: Evidence from BRIC Countries - Research Paper Example

This research work is a huge success for me and has given me the motivation to do more in my future academic endeavors too. This work could not have been in its present form without the assistance given to me by my teacher, parents, and friends.Oil has been amongst those factors which influence the economies of developed, developing, and underdeveloped countries significantly. In 1974, the embargo of OPEC resulted in a significant rise in oil prices which ultimately influenced the economies worldwide (Park, 2007).

It is due to these reasons that the impact of fluctuations in oil prices has been widely tested by researchers in connection with the economy and stock markets of different countries. An increase in oil prices has a significant impact on business entities particularly those entities which are in the business of manufacturing products and thus have significant reliance on oil as a fuel. An increase in oil price increase production cost for business enterprises and unless the increase is transferred to customers, it leads to a decline in profitability of those enterprises (Kilian & Hicks, 2012).

Stock markets today have a redefined role in the economic activity of a country, which project the pulse of economic well being of a nation (Spano, 2012). However, there are some external factors to the economy, such as oil, which may pose a significant influence on the national economy and more importantly business entities operating in the country.Although there are a number of research works available in academic literature, which pertain to the investigation of fluctuations in oil prices and their impact on stock prices of corporate entities, nevertheless the literature pertaining to this area has experienced consistent growth.

Considering the literature available on the area under investigation in this study, there are no particular studies that investigate the impact of changes in oil prices on stock prices of business entities based in BRIC countries. Owing to this literature gap, this study aims at focusing on investigating the impact of oil price fluctuations on the stock prices of companies operating in BRIC countries.