Abstract
The aim of this study is to assess the response of the South African stock market returns to oil price volatility, based on the daily South African stock market index, using the GARCH-Copula modelling technique. The results of the analysis show evidence of an asymmetric impact of fluctuations in oil prices on South African stock market returns, using a copula model specification, particularly the bivariate symmetrized Joe-Clayton (SJC) copula. The results also revealed that the EGARCH process is the best univariate model to capture oil price volatility. Interestingly, this study also revealed that the tourism industry is most dependent on oil price fluctuations, due to its heavy reliance on transportation costs. The economic implications of this study also suggest that sectors affected by oil price fluctuations need specific long-term and short-term monetary policy strategies. It is recommended that in the short term, expansionary monetary policy could assist in mitigating the impact of higher oil prices, while in the long-term, policies aimed at reducing the volatility in oil prices would be of great help in alleviating its harmful effect on stock market returns.