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Oil shocks, stock market prices, and the U.S. dividend yield decomposition

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  • Chortareas, Georgios
  • Noikokyris, Emmanouil

Abstract

We estimate the effects of oil supply and demand shocks on the U.S. dividend yield components (dividend growth, real interest rate, subjective equity premium and mispricing), as they emerge from a decomposition based on the Campbell and Vuolteenaho (2004a) framework. A positive relationship between oil price increases and dividend yield emerges, the persistence of which depends on the news driving oil price increases. The linkages between oil price shocks and dividend yield's components show that a confluence of factors determines the ultimate impact of oil price increases on stock market valuations, revealing information about the oil price pass-through mechanism.

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Bibliographic Info

Article provided by Elsevier in its journal International Review of Economics & Finance.

Volume (Year): 29 (2014)
Issue (Month): C ()
Pages: 639-649

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Handle: RePEc:eee:reveco:v:29:y:2014:i:c:p:639-649

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Web page: http://www.elsevier.com/locate/inca/620165

Related research

Keywords: Oil price shocks; Stock market prices; Structural VAR; Dividend yield decomposition;

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