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Crude Oil Prices and Stock Markets in Major Oil Exporting Countries: Evidence on Decoupling Feature

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  • Onour, Ibrahim

Abstract

This paper investigates common cyclical features between crude oil market and stock markets in major oil exporting countries including Saudi Arabia, UAE, and Kuwait. The results of the paper indicate, at low oil prices (below $40 per oil barrel) Saudi and Abu-Dhabi markets share common cyclical feature with oil market, but they digress from the oil market as oil prices rose above $40 per barrel. The decoupling feature indicate the capital markets and oil market respond in different pattern to cycle generating shocks, suggesting as higher oil prices may raise global investment risk, stock markets in these countries deflect from their key fundamental driver.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 23334.

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Date of creation: 10 May 2010
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Handle: RePEc:pra:mprapa:23334

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Keywords: Common trends; Shared cycles; nonlinear cointegration;

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  1. Engle, Robert F & Kozicki, Sharon, 1993. "Testing for Common Features," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(4), pages 369-80, October.
  2. Nandha, Mohan & Faff, Robert, 2008. "Does oil move equity prices? A global view," Energy Economics, Elsevier, vol. 30(3), pages 986-997, May.
  3. Engle, Robert F & Kozicki, Sharon, 1993. "Testing for Common Features: Reply," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(4), pages 393-95, October.
  4. Hilde C. Bjørnland, 2009. "Oil Price Shocks And Stock Market Booms In An Oil Exporting Country," Scottish Journal of Political Economy, Scottish Economic Society, vol. 56(2), pages 232-254, 05.
  5. Serletis, A & Demp, T, 1997. "The Cyclical Behavior of Monthly NYMEX Energy Prices," Papers 9703, Calgary - Department of Economics.
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  7. Ibrahim A. Onour, 2008. "What drives short-term GCC stock market returns? Empirical evidence from fat-tailed distribution," Afro-Asian Journal of Finance and Accounting, Inderscience Enterprises Ltd, vol. 1(1), pages 17-25.
  8. Vahid, F & Engle, Robert F, 1993. "Common Trends and Common Cycles," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(4), pages 341-60, Oct.-Dec..
  9. Carvalho, Vasco & Harvey, Andrew & Trimbur, Thomas, 2007. "A Note on Common Cycles, Common Trends, and Convergence," Journal of Business & Economic Statistics, American Statistical Association, vol. 25, pages 12-20, January.
  10. Serletis, Apostolos & Herbert, John, 1999. "The message in North American energy prices," Energy Economics, Elsevier, vol. 21(5), pages 471-483, October.
  11. Shawkat Hammoudeh & Eisa Aleisa, 2004. "Dynamic Relationships among GCC Stock Markets and Nymex Oil Futures," Contemporary Economic Policy, Western Economic Association International, vol. 22(2), pages 250-269, 04.
  12. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
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