Oil Price Shocks, Firm Uncertainty and Investment
It is found that an oil price shock in interaction with a firm’s stock price volatility has a negative effect on investment by that firm, both in the short and long-term. In the presence of this interaction term, linear variables in oil price shocks are not statistically significant. There is evidence that for the short-term effects of the interaction variable, the particular magnitude of an oil price shock may not be as important as the fact that there is an oil price shock. For the long-term effects, however, the magnitude of the oil price shock does matter. Over a longer horizon, oil price shocks depress investment more at firms facing greater uncertainty. An increase in firm stock price volatility continues to reduce the link between sales growth and investment in the presence of oil price shocks as in Bloom et al. (2007).
|Date of creation:||01 Sep 2010|
|Date of revision:|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Aloui, Chaker & Jammazi, Rania, 2009. "The effects of crude oil shocks on stock market shifts behaviour: A regime switching approach," Energy Economics, Elsevier, vol. 31(5), pages 789-799, September.
- Blundell, Richard & Bond, Stephen, 1998.
"Initial conditions and moment restrictions in dynamic panel data models,"
Journal of Econometrics,
Elsevier, vol. 87(1), pages 115-143, August.
- R Blundell & Steven Bond, . "Initial conditions and moment restrictions in dynamic panel data model," Economics Papers W14&104., Economics Group, Nuffield College, University of Oxford.
- Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
- Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
- Robert C. Merton, 1980.
"On Estimating the Expected Return on the Market: An Exploratory Investigation,"
NBER Working Papers
0444, National Bureau of Economic Research, Inc.
- Merton, Robert C., 1980. "On estimating the expected return on the market : An exploratory investigation," Journal of Financial Economics, Elsevier, vol. 8(4), pages 323-361, December.
- John Elder & Apostolos Serletis, 2010.
"Oil Price Uncertainty,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 42(6), pages 1137-1159, 09.
- Tom Doan, . "RATS programs to estimate structural VAR-GARCH-M model," Statistical Software Components RTZ00052, Boston College Department of Economics.
- Kiseok Lee & Shawn Ni & Ronald A. Ratti, 1995. "Oil Shocks and the Macroeconomy: The Role of Price Variability," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 39-56.
- Ichiro Fukunaga & Naohisa Hirakata & Nao Sudo, 2009.
"The Effects of Oil Price Changes on the Industry-Level Production and Prices in the U.S. and Japan,"
IMES Discussion Paper Series
09-E-24, Institute for Monetary and Economic Studies, Bank of Japan.
- Ichiro Fukunaga & Naohisa Hirakata & Nao Sudo, 2010. "The Effects of Oil Price Changes on the Industry-Level Production and Prices in the U.S. and Japan," NBER Working Papers 15791, National Bureau of Economic Research, Inc.
- Nicholas Bloom, 2009.
"The Impact of Uncertainty Shocks,"
Econometric Society, vol. 77(3), pages 623-685, 05.
- Park, Jungwook & Ratti, Ronald A., 2008. "Oil price shocks and stock markets in the U.S. and 13 European countries," Energy Economics, Elsevier, vol. 30(5), pages 2587-2608, September.
- Leahy, John V & Whited, Toni M, 1996.
"The Effect of Uncertainty on Investment: Some Stylized Facts,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 28(1), pages 64-83, February.
- John V. Leahy & Toni M. Whited, 1995. "The Effect of Uncertainty on Investment: Some Stylized Facts," NBER Working Papers 4986, National Bureau of Economic Research, Inc.
- Lee, Kiseok & Ni, Shawn, 2002. "On the dynamic effects of oil price shocks: a study using industry level data," Journal of Monetary Economics, Elsevier, vol. 49(4), pages 823-852, May.
- Driesprong, Gerben & Jacobsen, Ben & Maat, Benjamin, 2008. "Striking oil: Another puzzle?," Journal of Financial Economics, Elsevier, vol. 89(2), pages 307-327, August.
- Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119, December.
- Lutz Kilian & Cheolbeom Park, 2009.
"The Impact Of Oil Price Shocks On The U.S. Stock Market,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(4), pages 1267-1287, November.
- Kilian, Lutz & Park, Cheolbeom, 2007. "The Impact of Oil Price Shocks on the U.S. Stock Market," CEPR Discussion Papers 6166, C.E.P.R. Discussion Papers.
- M Arellano & O Bover, 1990.
"Another Look at the Instrumental Variable Estimation of Error-Components Models,"
CEP Discussion Papers
dp0007, Centre for Economic Performance, LSE.
- Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
- Manuel Arellano & Stephen Bond, 1991.
"Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations,"
Review of Economic Studies,
Oxford University Press, vol. 58(2), pages 277-297.
- Tom Doan, . "RATS program to replicate Arellano-Bond 1991 dynamic panel," Statistical Software Components RTZ00169, Boston College Department of Economics.
- Sadorsky, Perry, 1999. "Oil price shocks and stock market activity," Energy Economics, Elsevier, vol. 21(5), pages 449-469, October.
- Hamilton, James D, 1988. "A Neoclassical Model of Unemployment and the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 96(3), pages 593-617, June.
- Mork, Knut Anton, 1989. "Oil and Macroeconomy When Prices Go Up and Down: An Extension of Hamilton's Results," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 740-44, June.
- Rahman, Sajjadur & Serletis, Apostolos, 2011. "The Asymmetric Effects Of Oil Price Shocks," Macroeconomic Dynamics, Cambridge University Press, vol. 15(S3), pages 437-471, November.
- Hooker, Mark A., 1996. "What happened to the oil price-macroeconomy relationship?," Journal of Monetary Economics, Elsevier, vol. 38(2), pages 195-213, October.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:49044. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If references are entirely missing, you can add them using this form.