Hostname: page-component-cd9895bd7-dzt6s Total loading time: 0 Render date: 2024-12-27T10:12:22.016Z Has data issue: false hasContentIssue false
  • English
  • Français

HOW DO INTERNATIONAL STOCK MARKETS RESPOND TO OIL DEMAND AND SUPPLY SHOCKS?

Published online by Cambridge University Press:  07 June 2013

Jochen H. F. Güntner
Jochen H. F. Güntner*
Affiliation:
Johannes Kepler University Linz
*
Address correspondence to: Jochen Güntner, Department of Economics, Johannes Kepler University Linz, Altenberger Straße 69, 4040 Linz, Austria; e-mail: [email protected].
Get access Rights & Permissions [Opens in a new window]

Abstract

Building on Kilian and Park's (2009) structural VAR analysis of the effects of oil demand and supply shocks on the U.S. stock market, this paper focuses on the differences and commonalities of stock price responses in oil exporting and importing economies in 1974–2011. Structural oil price shocks add to our understanding of the 2008 stock market crash. I find that unexpected reductions in world oil supply do not affect stock returns in any of six OECD countries. Although an increase in global aggregate demand consistently raises oil prices and cumulative real stock returns, the effect is more persistent for oil exporters. Other, e.g., precautionary oil demand shocks have a detrimental impact on stock markets in oil-importing countries, a statistically insignificant effect for Canada, and a significantly positive effect for Norway. Oil price shocks account for a larger share of the variation in aggregate international stock returns than in national stock returns.

Keywords

Net Oil ExportersOil Price ShocksStock Market ReturnsStructural VAR Estimation
Type
Articles
Information
Macroeconomic Dynamics , Volume 18 , Issue 8 , December 2014 , pp. 1657 - 1682
Copyright
Copyright © Cambridge University Press 2013 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Alquist, Ron and Kilian, Lutz (2010) What do we learn from the price of crude oil futures? Journal of Applied Econometrics 25, 539–573.CrossRefGoogle Scholar
Aspergis, Nicholas and Miller, Stephen M. (2009) Do structural oil-market shocks affect stock prices? Energy Economics 31, 569–575.CrossRefGoogle Scholar
Barsky, Robert B. and Kilian, Lutz (2004) Oil and the macroeconomy since the 1970s. Journal of Economic Perspectives 18, 115–134.CrossRefGoogle Scholar
Baumeister, Christiane and Kilian, Lutz (2012) Real-time forecasts of the real price of oil. Journal of Business and Economic Statistics 30, 326–336.Google Scholar
Bernanke, Ben S., Gertler, Mark, and Watson, Mark (1997) Systematic monetary policy and the effects of oil price shocks. Brookings Papers on Economic Activity 28, 91–157.CrossRefGoogle Scholar
Bjørnland, Hilde C. (2009) Oil price shocks and stock market booms in an oil exporting country. Scottish Journal of Political Economy 56, 232–254.Google Scholar
Chen, Nai-Fu, Roll, Richard, and Ross, Stephen A. (1986) Economic forces and the stock market. Journal of Business 59, 383–403.CrossRefGoogle Scholar
den Haan, Wouter J. (2000) The comovement between output and prices. Journal of Monetary Economics 46, 3–30.Google Scholar
den Haan, Wouter J. and Sumner, Steven W. (2004) The comovement between real activity and prices in the G7. European Economic Review 48, 1333–1347.Google Scholar
Elder, John and Serletis, Apostolos (2011) Volatility in oil prices and manufacturing activity: An investigation of real options. Macroeconomic Dynamics 15, 379–395.Google Scholar
El-Sharif, Idris, Brown, Dick, Nixon, Bill, and Russell, Alex (2005) Evidence on the nature and extent of the relationship between oil prices and equity values in the UK. Energy Economics 27, 819–830.CrossRefGoogle Scholar
Engemann, Kristie M., Kliesen, Kevin L., and Owyang, Michael T. (2011) Do oil shocks drive business cycles? Some U.S. and international evidence. Macroeconomic Dynamics 15, 498–517.Google Scholar
Fama, Eugene F. and Schwert, William G. (1977) Asset returns and inflation. Journal of Financial Economics 5, 115–146.CrossRefGoogle Scholar
Gonçalves, Sílvia and Kilian, Lutz (2004) Bootstrapping autoregressions with conditional heteroskedasticity of unknown form. Journal of Econometrics 123, 89–120.Google Scholar
Gultekin, N. Bulent (1983) Stock market returns and inflation: Evidence from other countries. Journal of Finance 38, 49–65.Google Scholar
Hamilton, James D. (1983) Oil and the macroeconomy since World War II. Journal of Political Economy 91, 228–248.CrossRefGoogle Scholar
Hamilton, James D. (2003) What is an oil shock? Journal of Econometrics 113, 363–398.CrossRefGoogle Scholar
Hamilton, James D. (2008) Oil and the macroeconomy. In Durlauf, Steven N. and Blume, Lawrence E. (eds.), The New Palgrave Dictionary of Economics, 2nd ed.New York: Palgrave Macmillan.Google Scholar
Hamilton, James D. (2009) Understanding crude oil prices. Energy Journal 30, 179–206.Google Scholar
Hamilton, James D. and Herrera, Ana María (2004) Oil shocks and aggregate macroeconomic behavior: The role of monetary policy. Journal of Money, Credit and Banking 36, 265–286.CrossRefGoogle Scholar
Herrera, Ana María, Lagalo, Latika Gupta, and Wada, Tatsuma (2011) Oil price shocks and industrial production: Is the relationship linear? Macroeconomic Dynamics 15, 472–497.Google Scholar
Hess, Patrick J. and Lee, Bong-Soo (1999) Stock returns and inflation with supply and demand disturbances. Review of Financial Studies 12, 1203–1218.Google Scholar
Huang, Roger D., Masulis, Ronald W., and Stoll, Hans R. (1996) Energy shocks and financial markets. Journal of Futures Markets 16, 1–27.Google Scholar
Jaffe, Jeffrey F. and Mandelker, Gershon (1976) The “Fisher effect” for risky assets: An empirical investigation. Journal of Finance 31, 447–458.Google Scholar
Jones, Charles M. and Gautam Kaul (1996) Oil and the stock markets. Journal of Finance 51, 463–491.CrossRefGoogle Scholar
Jung, Hangsol and Park, Cheolbeom (2011) Stock market reaction to oil price shocks: A comparison between an oil-exporting economy and an oil-importing economy. Journal of Economic Theory and Econometrics 22, 1–29.Google Scholar
Kaul, Gautam and Seyhun, H. Nejat (1990) Relative price variability, real shocks, and the stock market. Journal of Finance 45, 479–496.Google Scholar
Kilian, Lutz (2008a) Exogenous oil supply shocks: How big are they and how much do they matter for the U.S. economy? Review of Economics and Statistics 90, 216–240.Google Scholar
Kilian, Lutz (2008b) The economic effects of energy price shocks. Journal of Economic Literature 46, 871–909.Google Scholar
Kilian, Lutz (2009) Not all oil price shocks are alike: Disentangling demand and supply shocks in the crude oil market. American Economic Review 99, 1053–1069.Google Scholar
Kilian, Lutz and Murphy, Dan P. (in press) The role of inventories and speculative trading in the global market for crude oil. Journal of Applied Econometrics.Google Scholar
Kilian, Lutz and Park, Cheolbeom (2009) The impact of oil price shocks on the U.S. stock market. International Economic Review 50, 1267–1287.CrossRefGoogle Scholar
Kilian, Lutz, Rebucci, Alessandro, and Spatafora, Nikola (2009) Oil shocks and external balances. Journal of International Economics 77, 181–194.CrossRefGoogle Scholar
Kilian, Lutz and Vega, Clara (2011) Do energy prices respond to U.S. macroeconomic news? A test of the hypothesis of predetermined energy prices. Review of Economics and Statistics 93, 660–671.CrossRefGoogle Scholar
Kilian, Lutz and Vigfusson, Robert J. (2011a) Are the responses of the U.S. economy asymmetric in energy price increases and decreases? Quantitative Economics 2, 419–453.Google Scholar
Kilian, Lutz and Vigfusson, Robert J. (2011b) Nonlinearities in the oil price–output relationship. Macroeconomic Dynamics 15, 337–363.CrossRefGoogle Scholar
Kling, John L. (1985) Oil price shocks and stock market behavior. Journal of Portfolio Management 12, 34–39.Google Scholar
Lee, Kinseok, Kang, Wensheng, and Ratti, Ronald A. (2011) Oil price shocks, firm uncertainty, and investment. Macroeconomic Dynamics 15, 416–436.CrossRefGoogle Scholar
Mork, Knut A. (1989) Oil and the macroeconomy when prices go up and down: An extension of Hamilton's results. Journal of Political Economy 97, 740–744.Google Scholar
Nandha, Mohan and Faff, Robert (2008) Does oil move equity prices? A global view. Energy Economics 30, 986–997.CrossRefGoogle Scholar
Park, Jungwook and Ratti, Ronald A. (2008) Oil price shocks and stock markets in the U.S. and 13 European countries. Energy Economics 30, 2587–2608.Google Scholar
Rudebusch, Glenn D. (1993) The uncertain unit root in real GDP. American Economic Review 83, 264–272.Google Scholar
Sadorsky, Perry (1999) Oil price shocks and stock market activity. Energy Economics 21, 449–469.Google Scholar
Sadorsky, Perry (2001) Risk factors in stock returns of Canadian oil and gas companies. Energy Economics 23, 17–28.Google Scholar