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Oil and stock returns: Frequency domain evidence

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  • Ciner, Cetin

Abstract

This paper examines the relation between oil price changes and stock returns. By using recently developed frequency domain methods, the study shows that there is significant time variation in the linkage between oil and equities. Oil price shocks with less than 12-month persistency have a negative impact on stock returns, while shocks with persistency between 12 and 36 months are associated with positive stock returns. Hence, the analysis supports the view that not all oil price movements are alike and, and joint rises in oil and stock market can in fact be observed. The implications of the findings for participants in financial markets and policy makers are discussed.

Suggested Citation

  • Ciner, Cetin, 2013. "Oil and stock returns: Frequency domain evidence," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 23(C), pages 1-11.
    • Handle: RePEc:eee:intfin:v:23:y:2013:i:c:p:1-11
    DOI: 10.1016/j.intfin.2012.09.002
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    More about this item

    Keywords

    Oil; Frequency domain tests; Stock returns;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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