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Electric Cars and Oil Prices

  • Azar, Jose

This paper studies the joint dynamics of oil prices and interest in electric cars, measured as the volume of Google searches for related phrases. Not surprisingly, I find that oil price shocks predict increases in Google searches for electric cars. Much more surprisingly, I also find that an increase in Google searches predicts declines in oil prices. The high level of public interest in electric cars between April and August of 2008 can explain approximately half of the decline in oil prices during the second half of 2008. These findings are significant because they show that oil markets respond to developments related to alternative technologies. I investigate several hypotheses explaining these results.

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File URL: https://mpra.ub.uni-muenchen.de/15538/1/MPRA_paper_15538.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 15538.

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Date of creation: 06 Aug 2009
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Handle: RePEc:pra:mprapa:15538
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  2. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March.
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  4. Harrison Hong & Jeremy C. Stein, 1999. "A Unified Theory of Underreaction, Momentum Trading, and Overreaction in Asset Markets," Journal of Finance, American Finance Association, vol. 54(6), pages 2143-2184, December.
  5. Kilian, Lutz, 2007. "The Economic Effects of Energy Price Shocks," CEPR Discussion Papers 6559, C.E.P.R. Discussion Papers.
  6. Christopher A. Sims & Tao Zha, 1999. "Error Bands for Impulse Responses," Econometrica, Econometric Society, vol. 67(5), pages 1113-1156, September.
  7. James D. Hamilton, 2008. "Understanding Crude Oil Prices," NBER Working Papers 14492, National Bureau of Economic Research, Inc.
  8. Chib, Siddhartha, 1996. "Calculating posterior distributions and modal estimates in Markov mixture models," Journal of Econometrics, Elsevier, vol. 75(1), pages 79-97, November.
  9. Christopher A. Sims & Tao Zha, 1996. "Bayesian methods for dynamic multivariate models," FRB Atlanta Working Paper No. 96-13, Federal Reserve Bank of Atlanta.
  10. S. Boragan Aruoba & Francis X. Diebold & Chiara Scotti, 2007. "Real-time measurement of business conditions," International Finance Discussion Papers 901, Board of Governors of the Federal Reserve System (U.S.).
  11. Harrison Hong & Terence Lim & Jeremy C. Stein, 2000. "Bad News Travels Slowly: Size, Analyst Coverage, and the Profitability of Momentum Strategies," Journal of Finance, American Finance Association, vol. 55(1), pages 265-295, 02.
  12. Kent Daniel & David Hirshleifer & Avanidhar Subrahmanyam, 1998. "Investor Psychology and Security Market Under- and Overreactions," Journal of Finance, American Finance Association, vol. 53(6), pages 1839-1885, December.
  13. Eyal Dvir & Kenneth S. Rogoff, 2009. "Three Epochs of Oil," NBER Working Papers 14927, National Bureau of Economic Research, Inc.
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