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Co-movement of international crude oil price and Indian stock market: Evidences from nonlinear cointegration tests

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  • Ghosh, Sajal
  • Kanjilal, Kakali

Abstract

This article explores nonlinear cointegration between international crude oil price and Indian stock market in a multivariate framework for the period January 2, 2003 to July 29, 2011 by threshold cointegration tests which determine the structural breaks endogenously. The tests reject any long-run equilibrium relationship among the variables for the entire data span. In order to get better insight, threshold cointegration tests have been applied on three sub-phases; prior (phase I) and post (phase III) to most volatile phase (phase II) spanning from July 2, 2007 to Dec 29, 2008. The tests suggest existence of cointegration in phase III only. Toda–Yamamoto version of Granger causality tests reveals that movements of international crude oil price have impact on Indian stock market in phases II and III with no feedback effect. The findings also suggest that global crude oil price is exogenously determined.

Suggested Citation

  • Ghosh, Sajal & Kanjilal, Kakali, 2016. "Co-movement of international crude oil price and Indian stock market: Evidences from nonlinear cointegration tests," Energy Economics, Elsevier, vol. 53(C), pages 111-117.
    • Handle: RePEc:eee:eneeco:v:53:y:2016:i:c:p:111-117
    DOI: 10.1016/j.eneco.2014.11.002
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    More about this item

    Keywords

    Oil price; Stock market; India; Threshold cointegration; Endogenous structural breaks;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General

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