Resources Policy 70 (2021) 101946 0301-4207/© 2020 Elsevier Ltd. All rights reserved. Asymmetric effect of oil prices on stock market prices: New evidence from oil-exporting and oil-importing countries Shabir Mohsin Hashmi a , Bisharat Hussain Chang a, * , Niaz Ahmed Bhutto b a School of Economics and Management, Yancheng Institute of Technology, China b Department of Business Administration, Sukkur IBA University, Sukkur, Pakistan A R T I C L E INFO JEL classifcation: C22 C50 F30 G10 G12 Q43 Keywords: QARDL model QNARDL model Stock prices Oil prices ABSTRACT This paper examines the short-run and long-run effect of oil prices across bullish, bearish, and normal states of the stock markets in oil-exporting and oil-importing countries where oil-exporting countries include Russia, Mexico, Venezuela, and Norway and oil-importing countries include India, China, Japan and Norway. For this purpose, we use quantile ARDL model and compare its fndings with the standard nonlinear ARDL model. Moreover, this study uses quantile nonlinear ARDL model where oil price series is decomposed into positive and negative oil price shocks. The nonlinear ARDL estimates do not support co-integration in the long-run whereas, in the short-run, it supports asymmetric effect in all countries except Norway. Besides, the quantile ARDL estimates indicate that oil prices asymmetrically affect stock prices both in the short-run and long-run and for all sample countries. Finally, the empirical estimates of the quantile nonlinear ARDL model are consistent with the esti- mates from the quantile ARDL model. The fndings of this study provide important policy implications for in- vestors, policymakers and other stakeholders. 1. Introduction In the last few decades, numerous studies have been conducted to examine the relationship between oil prices and stock prices. (see for example Jones and Kaul, 1996; Driesprong et al., 2008; Sukcharoen et al., 2014; Creti et al., 2014; Chou and Tseng 2016; Bouri 2015; Joo and Park 2017). These studies indicate that the main reason behind this relationship is the effect of international oil prices on corporate cash fows and earnings (Arouri et al., 2012). Moreover, the relationship between oil prices and stock prices can also be explained by the theory of equity valuation. This theory states that stock prices are the sum of discounted values of future cash fows which frms receive during different periods. These cash fows are affected by macroeconomic fac- tors (e.g. economic growth, income, production costs, interest rates, infation, and consumer confdence), and macroeconomic factors, in turn, are affected by oil price shocks (Jouini 2013; Arouri and Nguyen 2010). Due to this fact, the available literature suggests that substantial changes in oil prices cause changes in stock prices (Huang et al., 1996). Moreover, this literature supports positive relationship between oil prices and stock prices in oil-exporting countries (Kilian and Park, 2009), whereas it provides inconsistent fndings in oil-importing countries (Badeeb and Lean, 2018). Recent literature further suggests that the relationship between oil and stock prices is asymmetric (See for example; Chang, 2020; Chang et al., 2020a; Demirer et al., 2019; Badeeb and Lean, 2018; Basher et al., 2018; Ready 2018). Therefore, this literature uses different techniques to examine the asymmetric/nonlinear relationship between oil prices and stock prices. For example, Wang et al. (2011) checked the nonlin- earity using threshold co-integration framework proposed by Endres and Siklos (2001). Beckmann and Czudaj (2013) also checked the nonline- arity using Markov-switching vector error correction model proposed by Hamilton (1989) and concluded the nonlinear relationship between oil and stock prices. Recently, Badeeb and Lean (2018) extended the existing literature by using nonlinear ARDL (NARDL) model proposed by Shin et al. (2014). Their empirical results indicate that positive and negative shocks in oil prices asymmetrically affect stock prices. How- ever, their study fails to examine the asymmetric relationship across various states of the stock markets; whereas, recent literature concludes that stock markets’ response to oil price shocks varies across bullish, bearish, and normal states of the stock markets (Chang et al., 2020a). Moreover, other studies also conclude that the relationship between oil prices and stock prices is quantile dependent (You et al., 2017; Zhu et al., * Corresponding author. E-mail addresses: hashmishabbir@gmail.com (S.M. Hashmi), bisharat.chang86@gmail.com (B.H. Chang), niaz@iba-suk.edu.pk (N.A. Bhutto). Contents lists available at ScienceDirect Resources Policy journal homepage: http://www.elsevier.com/locate/resourpol https://doi.org/10.1016/j.resourpol.2020.101946 Received 4 May 2020; Received in revised form 18 August 2020; Accepted 25 November 2020