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The impact of oil price shocks on the US stock market: A note on the roles of US and non-US oil production

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  • Wensheng Kang
  • Ronald A. Ratti
  • Joaquin Vespignani

Abstract

Kilian and Park (IER 50 (2009), 1267-1287) find shocks to oil supply are relatively unimportant to understanding changes in U.S. stock returns. We examine the impact of both U.S. and non-U.S. oil supply shocks on U.S. stock returns in light of the unprecedented expansion in U.S. oil production since 2009. Our results underscore the importance of the disaggregation of world oil supply and of the recent extraordinary surge in the U.S. oil production for analysing impact on U.S. stock prices. A positive U.S. oil supply shock has a positive impact on U.S. real stock returns. Oil demand and supply shocks are of comparable importance in explaining U.S. real stock returns when supply shocks from U.S. and non-U.S. oil production are identified.

Suggested Citation

  • Wensheng Kang & Ronald A. Ratti & Joaquin Vespignani, 2016. "The impact of oil price shocks on the US stock market: A note on the roles of US and non-US oil production," CAMA Working Papers 2016-33, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  • Handle: RePEc:een:camaaa:2016-33
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    References listed on IDEAS

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    1. Hendry, David F. & Hubrich, Kirstin, 2011. "Combining Disaggregate Forecasts or Combining Disaggregate Information to Forecast an Aggregate," Journal of Business & Economic Statistics, American Statistical Association, vol. 29(2), pages 216-227.
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    4. Lutz Kilian & Clara Vega, 2011. "Do Energy Prices Respond to U.S. Macroeconomic News? A Test of the Hypothesis of Predetermined Energy Prices," The Review of Economics and Statistics, MIT Press, vol. 93(2), pages 660-671, May.
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    More about this item

    Keywords

    Oil prices; Stock returns; U.S. oil production;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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