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Natural gas prices and stock prices: Evidence from EU-15 countries

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  • Acaravci, Ali
  • Ozturk, Ilhan
  • Kandir, Serkan Yilmaz

Abstract

This study investigates the long-run relationship between natural gas prices and stock prices by using the Johansen and Juselius cointegration test and error–correction based Granger causality models for the EU-15 countries. We employ quarterly data covering the period from 1990:1 to 2008:1. Empirical findings suggest that there is a unique long-term equilibrium relationship between natural gas prices, industrial production and stock prices in Austria, Denmark, Finland, Germany and Luxembourg. However, no relationship is found between these variables in the other ten EU-15 countries. Although we detect a significant long-run relationship between stock prices and natural gas prices, Granger causality test results imply an indirect Granger causal relationship between these two variables. In addition, we investigate the Granger causal relationship between stock returns, industrial production growth and natural gas price increase for Austria, Denmark, Finland, Germany and Luxembourg. As a result, increase in natural gas prices seem to impact industrial production growth at the first place. In turn, industrial production growth appears to affect stock returns.

Suggested Citation

  • Acaravci, Ali & Ozturk, Ilhan & Kandir, Serkan Yilmaz, 2012. "Natural gas prices and stock prices: Evidence from EU-15 countries," Economic Modelling, Elsevier, vol. 29(5), pages 1646-1654.
    • Handle: RePEc:eee:ecmode:v:29:y:2012:i:5:p:1646-1654
    DOI: 10.1016/j.econmod.2012.05.006
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    More about this item

    Keywords

    Natural gas prices; Stock prices; Economic activity; Cointegration; EU-15 countries;
    All these keywords.

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • G1 - Financial Economics - - General Financial Markets
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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