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On the Linkage between the International Crude Oil Price and Stock Markets: Evidence from the Nordic and Other European Oil Importing and Oil Exporting Countries


  • Murad A. BEIN

    () (Department of Accounting and Finance, Faculty of Economics and Administrative Sciences, Cyprus International University. Lefkosa, via Mersin 10, Turkey.)

  • Mehmet AGA

    () (Department of Accounting and Finance, Faculty of Economics and Administrative Sciences, Cyprus International University. Lefkosa, via Mersin 10, Turkey.)


The paper investigates the interrelationship between the stock market and the crude oil price for the Nordic countries (Denmark, Finland, Iceland, Norway, and Sweden) and two other European countries that have the highest imports (Germany) and exports (Russia) of oil using data from 1995 to the end of 2015. We found that the time-varying correlation among the oil exporting (importing) countries are different. We also found that the two oil exporting countries (Norway and Russia) have higher integration with the Brent and West Texas Intermediate (WTI) oil indices, which reveals that these markets are less attractive to international investors during periods of high turbulence. Furthermore, contrary to previous literature documenting negative relations between the stock market and crude oil, our results demonstrate that, although the negative association was evident up to the period prior to the global financial crisis (GFC), starting from the GFC period (especially for the oil importing countries), we noticed a positive time-varying relationship that continued until the end of our sample study. In addition, the time-varying correlation response was more pronounced during the financial market turmoil of 2015. Further, we investigated the two price indices (Brent and WTI) using the Markov regime-switching autoregressive (MRS-AR) approach to model periods of high volatility (turbulence) and low volatility (stable period). The Markov model revealed that in regime 0 (1998-2002, 2008-2009, and 2015), which can be characterized as the most volatile period for the oil market, the probability reached close to 1. We noticed that during the GFC and in the period prior to the GFC, the time-varying relationship was positive and at a higher level in high-volatility regimes, whereas during low-volatility regimes the time-varying relationship was negative and at a low level.

Suggested Citation

  • Murad A. BEIN & Mehmet AGA, 2016. "On the Linkage between the International Crude Oil Price and Stock Markets: Evidence from the Nordic and Other European Oil Importing and Oil Exporting Countries," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 115-134, December.
  • Handle: RePEc:rjr:romjef:v::y:2016:i:4:p:115-134

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    References listed on IDEAS

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    Cited by:

    1. Dohyun CHUN & Hoon CHO & Doojin RYU, 2018. "Macroeconomic Structural Changes in a Leading Emerging Market: The Effects of the Asian Financial Crisis," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 22-42, December.
    2. Dejan Živkov & Jovan Njegiæ & Mirela Momèiloviæ, 2018. "Bidirectional spillover effect between Russian stock index and the selected commodities," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics, vol. 36(1), pages 29-53.
    3. Daniel Ştefan Armeanu & Camelia Cătălina Joldeş & Ştefan Cristian Gherghina, 2019. "On the Linkage between the Energy Market and Stock Returns: Evidence from Romania," Energies, MDPI, Open Access Journal, vol. 12(8), pages 1-21, April.

    More about this item


    oil price; oil importing; oil exporting volatility; financial crisis;

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • G1 - Financial Economics - - General Financial Markets
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy


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