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Relationship between Crude Oil Prices and Stock Market: Evidence from India

Author

Listed:
  • Ankit Sharma

    (Accendere Knowledge Management Private Limited, Chennai, Tamil Nadu, India)

  • Sasmita Giri

    (Institute of Finance and International Management, Business School, Bangalore, Karnataka, India,)

  • Harsh Vardhan

    (Institute of Finance and International Management, Business School, Bangalore, Karnataka, India)

  • Sujeet Surange

    (Institute of Finance and International Management, Business School, Bangalore, Karnataka, India,)

  • Rohan Shetty

    (Institute of Finance and International Management, Business School, Bangalore, Karnataka, India)

  • Vishwaroop Shetty

    (Institute of Finance and International Management, Business School, Bangalore, Karnataka, India.)

Abstract

This paper estimates the linear interdependencies between international crude oil prices and stock market indices of India using weekly data spanning from January 2010 to January 2017 in a vector autoregressive (VAR) framework. The time series used for the analysis are crude oil futures prices, nifty index, and BSE energy index. Augmented Dickey-Fuller and Philips-Perron unit root tests reveal that all the time series are non-stationary at level and stationary at first difference. Cointegration test reveals the absence of cointegrating factor i.e., absence of long run relationship. VAR model captures all the time series as endogenous variables and independent variables are studied at two lags. Result shows that the Energy Index is very well explained by the lagged values of crude oil futures prices, nifty index, and BSE energy Index. impulse response function reveals that crude oil prices are affected negatively when one standard deviation shocks are given to stock indices.

Suggested Citation

  • Ankit Sharma & Sasmita Giri & Harsh Vardhan & Sujeet Surange & Rohan Shetty & Vishwaroop Shetty, 2018. "Relationship between Crude Oil Prices and Stock Market: Evidence from India," International Journal of Energy Economics and Policy, Econjournals, vol. 8(4), pages 331-337.
    • Handle: RePEc:eco:journ2:2018-04-41
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    References listed on IDEAS

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    Cited by:

    1. Muhammad Ali, Khalid M. Iraqi, Abdul Waheed Khan, 2019. "Impact of Oil Prices on Stock Market Performance: Evidence from Top Oil Importing Countries," Journal of Finance and Economics Research, Geist Science, Iqra University, Faculty of Business Administration, vol. 4(2), pages 1-14, October.
    2. Mohamed Albaity & Ray Saadaoui Mallek & Hasan Mustafa, 2022. "Bank Stock Return Reactions to the COVID-19 Pandemic: The Role of Investor Sentiment in MENA Countries," Risks, MDPI, vol. 10(2), pages 1-15, February.
    3. Hani El-Chaarani, 2019. "The Impact of Oil Prices on Stocks Markets: New Evidence During and After the Arab Spring in Gulf Cooperation Council Economies," International Journal of Energy Economics and Policy, Econjournals, vol. 9(4), pages 214-223.
    4. Togonidze, Sophio & Kočenda, Evžen, 2022. "Macroeconomic responses of emerging market economies to oil price shocks: An analysis by region and resource profile," Economic Systems, Elsevier, vol. 46(3).
    5. Rodrigo A. Morales Fernández Rafaelly & Roberto J. Santillán-Salgado, 2021. "Oil price effect on sectoral stock returns: A conditional covariance and correlation approach for Mexico," Remef - Revista Mexicana de Economía y Finanzas Nueva Época REMEF (The Mexican Journal of Economics and Finance), Instituto Mexicano de Ejecutivos de Finanzas, IMEF, vol. 16(1), pages 1-15, Enero - M.
    6. Parul Bhatia, 2021. "Sustainability Of Exchange Rates And Crude Oil Prices Connection With Covid-19: An Investigation For Brics," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 5, pages 19-29, October.
    7. Theophilus Teye Osah & Andre Varella Mollick, 2023. "Stock and oil price returns in international markets: Identifying short and long-run effects," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 47(1), pages 116-141, March.
    8. Warsono Warsono & Edwin Russels & Wamiliana Wamiliana & Widiarti Widiarti & Mustofa Usman, 2019. "Vector Autoregressive with Exogenous Variable Model and its Application in Modeling and Forecasting Energy Data: Case Study of PTBA and HRUM Energy," International Journal of Energy Economics and Policy, Econjournals, vol. 9(2), pages 390-398.

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    More about this item

    Keywords

    Crude oil; BSE Energy Index; Nifty; Vector Autoregression;
    All these keywords.

    JEL classification:

    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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