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Effects of oil price shocks on the stock market performance: Do nature of shocks and economies matter?

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  • Le, Thai-Ha
  • Chang, Youngho

Abstract

The main focus of this study is to examine how oil price fluctuations influence the performance of stock markets. This study used the causality approach developed by Toda and Yamamoto (1995) to explore the causality between oil prices and stock prices in the long-run and their short-term impact. The generalized impulse response functions were applied to the monthly data in the period from January 1997 to July 2013. In this study, to capture the different characteristics of oil refining, exporting and importing, three Asian economies were examined. The results indicate that the manner in which a market reacts to hikes in oil prices varies between different markets and periods. This depends on differences in the oil characteristics of the economy and the nature of the shock in oil prices.

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  • Le, Thai-Ha & Chang, Youngho, 2015. "Effects of oil price shocks on the stock market performance: Do nature of shocks and economies matter?," Energy Economics, Elsevier, vol. 51(C), pages 261-274.
    • Handle: RePEc:eee:eneeco:v:51:y:2015:i:c:p:261-274
    DOI: 10.1016/j.eneco.2015.06.019
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    More about this item

    Keywords

    Stock market returns; Oil price fluctuations; Gregory–Hansen co-integration test; Toda–Yamamoto Granger non-causality test;
    All these keywords.

    JEL classification:

    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • F3 - International Economics - - International Finance
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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