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Revisiting the Effect of Crude Oil Price Movements on US Stock Market Returns and Volatility

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  • Ralph Sonenshine
  • Michael Cauvel

Abstract

From mid-2014 to 2016, oil prices plunged rapidly causing significant volatility in the US and global equity markets. This change in crude oil prices occurred after a significant run up in oil prices three to four years earlier. Each change in the growth trajectory of oil prices affects stock market returns. How and why do oil price shocks affect the expected stock market returns among key sectors of the economy? This paper explores this issue by examining how the magnitude of crude oil price changes affect the stock market returns and variances of key producing, banking and consuming segments of the US economy. Our findings provide some explanations for the asymmetric responses to positive and negative oil shocks found in these key sectors of the economy.

Suggested Citation

  • Ralph Sonenshine & Michael Cauvel, 2017. "Revisiting the Effect of Crude Oil Price Movements on US Stock Market Returns and Volatility," Working Papers 2017-01, American University, Department of Economics.
    • Handle: RePEc:amu:wpaper:2017-01
    DOI: 10.17606/gz94-d845
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    References listed on IDEAS

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    Cited by:

    1. T.P. Ghosh, 2019. "Economic Diversification and the State of Oil Dependency of UAE Stock Returns-An Analysis of ADX Indices 2014-2019," Accounting and Finance Research, Sciedu Press, vol. 8(4), pages 199-199, November.

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    More about this item

    Keywords

    Deregulation; mergers; regulated industries; natural monopoly;
    All these keywords.

    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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