Title: Financial markets, energy stock prices and energy political decisions: the case of Cyprus

Authors: Augustinos I. Dimitras; George D. Peppas; Ioannis Tsakalos

Addresses: School of Social Sciences, Hellenic Open University, Greece ' School of Social Sciences, Hellenic Open University, Greece ' Department of Business Administration, Business School, University of the Aegean, Greece

Abstract: The impact of energy deals announcements on the stock markets is a topic that concerns not only academics but investors and funds too. This study examines the linkages between financial markets and energy firms' stock price returns after the decision of the Cypriot Government to exploit its oil and natural gas deposits within its exclusive economic zone. This decision has several geopolitical aspects which affect a large number of interested parties. We employ a dynamic conditional correlation model to measure the effect on financial markets as well as energy firms' stock returns. Results provide evidence that there is no significant impact on either financial markets or energy firms' stock prices. Moreover, we highlight the importance of similar political decisions and the reactions of Cyprus' neighbouring countries.

Keywords: energy; financial markets; dynamic conditional correlation; DCC; geopolitics of energy; Cyprus.

DOI: 10.1504/IJFERM.2020.107668

International Journal of Financial Engineering and Risk Management, 2020 Vol.3 No.3, pp.240 - 253

Received: 14 Dec 2018
Accepted: 18 Apr 2019
Published online: 08 Jun 2020 *

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