Do Structural Oil-Market Shocks Affect Stock Prices?
AbstractThis paper investigates how explicit structural shocks that characterize the endogenous character of oil price changes affect stock-market returns in a sample of eight countries – Australia, Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. For each country, the analysis proceeds in two steps. First, modifying the procedure of Kilian (2008a), we employ a vector error-correction or vector autoregressive model to decompose oil-price changes into three components: oil-supply shocks, global aggregate-demand shocks, and global oil-demand shocks. The last component relates to specific idiosyncratic features of the oil market, such as changes in the precautionary demand concerning the uncertainty about the availability of future oil supplies. Second, recovering the oil-supply shocks, global aggregate-demand shocks, and global oil-demand shocks from the first analysis, we then employ a vector autoregressive model to determine the effects of these structural shocks on the stock market returns in our sample of eight countries. We find that international stock market returns do not respond in a large way to oil market shocks. That is, the significant effects that exist prove small in magnitude.
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Bibliographic InfoPaper provided by University of Nevada, Las Vegas , Department of Economics in its series Working Papers with number 0917.
Length: 26 pages
Date of creation: Mar 2009
Date of revision:
Publication status: Published in Energy Economics, July 2009
real stock returns; structural oil-price shocks; variance decomposition;
Other versions of this item:
- Apergis, Nicholas & Miller, Stephen M., 2009. "Do structural oil-market shocks affect stock prices?," Energy Economics, Elsevier, vol. 31(4), pages 569-575, July.
- Nicholas Apergis & Stephen M. Miller, 2008. "Do Structural Oil-Market Shocks Affect Stock Prices?," Working papers 2008-51, University of Connecticut, Department of Economics.
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-06-10 (All new papers)
- NEP-BEC-2009-06-10 (Business Economics)
- NEP-CBA-2009-06-10 (Central Banking)
- NEP-ENE-2009-06-10 (Energy Economics)
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