Forty Years of Oil Price Fluctuations: Why the Price of Oil May Still Surprise Us

Baumeister, Christiane; Kilian, Lutz

doi:10.2139/ssrn.2714319

Cited by 70 publications

(100 citation statements)

References 46 publications

(35 reference statements)

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“…The answer depends in important part on why the price of oil declined and how important these determinants will remain in the future (see Baumeister and Kilian 2016b). For example, to the extent that this price decline was caused by the fracking boom, the relevant question becomes how long this boom can persist at current prices with many commercial tight oil producers already experiencing heavy operating losses and how quickly these firms could resume tight oil production at higher oil prices, if they were forced to close down.…”

Section: Discussionmentioning

confidence: 99%

The Impact of the Fracking Boom on Arab Oil Producers

Kilian¹

2017

The Energy Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may

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Section: Discussionmentioning

confidence: 99%

The Impact of the Fracking Boom on Arab Oil Producers

Kilian¹

2017

The Energy Journal

Self Cite

109

101

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“…Finally, financial historians, like Ahamed (2009) and Ferguson (2008), have suggested that financial crises are often preceded by bubbles in the asset and commodity markets, which, in turn is vindicated by Phillips and Yu (2011) based on formal tests of bubble detection in real-time. 1 See for example, Rasche and Tatom (1977), Mork and Hall (1980), Hamilton (1983Hamilton ( , 2011, and Hickman et al (1987), Balke et al, (2002Balke et al, ( , 2010, Brown and Yücel (2002), Barsky and Kilian (2004), Jones et al (2004), Kilian (2008aKilian ( ,b, 2009a, Elder and Serletis (2010), Nakov and Pescatori (2010), Baumeister and Peersman (2013a,b), Kang and Ratti (2013a, b), Antonakakis et al, (2014a), Bjørnland and Larsen (2015), and Baumeister and Kilian (2015), and references cited therein.. 2 More recent studies followed, and includes that of of Fischer and Merton (1984), Barro (1990), Fama (1981Fama ( , 1990, Harvey (1989), Stock and Watson (1989), Choi et al (1999), Schwert (1990), Estrella and Mishkin (1998), Colombage (2009), Nyberg (2010), Mili et al (2012), and Erdogan et al, (2015). 3 Interestingly, Campbell et al (2001) proposes that the variance of stock returns, rather than the returns themselves, have predictive content for output growth.…”

Section: Introductionmentioning

confidence: 99%

Common cycles and common trends in the stock and oil markets: Evidence from more than 150 years of data

2017

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This paper investigates the role of permanent and transitory shocks, within the framework of common cycles and common trends, in explaining stock and oil prices. We perform a multivariate variance decomposition analysis of monthly data on the West Texas Intermediate (WTI) oil price and the S&P500. The dataset used in the study spans a long period of 150 years and therefore contains a rich history to examine both the short-and longrun comovement properties of oil and stock prices. Given that the oil and stock markets might comove both in the short-and long-run, it is of interest to see the relative impacts of transitory and permanent shocks on both variables. We find that (log) oil price and (log) S&P 500 share a common stochastic trend for our full sample of September 1859 to July 2015, but a common cycle only exists during the post-WW II period. Full and post-WW II samples have quite different common feature estimates in terms of the impact of permanent and transitory shocks as measured by the impulse responses and forecast error variance decompositions. We also find that in the short-run oil is driven mostly by cycles (transitory shocks) and stock market is mostly driven by permanent shocks. But, permanent shocks dominate in the long-run.1

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“…, where the sample ends in December 2007. Focusing on the most recent years, we see that the four structural shocks match the recent developments in the global crude oil market, as describe in Kilian and Baumeister (2016). For example, the plunge in the oil price from 2014 onwards can be attributed to both a falling aggregate demand and a robust oil supply.…”

Section: Global Structural Oil-market Shocks and Their Effects On Oilmentioning

confidence: 65%

The Impact of Oil-Market Shocks on Stock Returns in Major Oil-Exporting Countries: A Markov Switching Approach

2017

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The impact that oil shocks have on stock prices in oil exporting countries has implications for both domestic and international investors. We derive the shocks driving oil prices from a fullyidentified structural model of the oil market. We study their nonlinear relationship with stock market returns in major oil-exporting countries in a multi-factor Markov-switching framework. Flow oil-demand shocks have a statistically significant impact on stock returns in Canada, Norway, Russia, Kuwait, Saudi Arabia, and the UAE. Idiosyncratic oil-market shocks affect stock returns in Norway, Russia, Kuwait, Saudi Arabia and UAE. Speculative oil shocks impact stock returns in Canada, Russia, Kuwait and the UAE. Flow oil-supply shocks matter for the UK, Kuwait, and UAE. Mexico is the only country where stock returns are unaffected by oil shocks. These results shed important light on investor sentiment toward the relationship between oil shocks and stock markets in oil exporting countries. JEL Classification: E44, G15, Q43

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Forty Years of Oil Price Fluctuations: Why the Price of Oil May Still Surprise Us

Cited by 70 publications

References 46 publications

The Impact of the Fracking Boom on Arab Oil Producers

The Impact of the Fracking Boom on Arab Oil Producers

Common cycles and common trends in the stock and oil markets: Evidence from more than 150 years of data

The Impact of Oil-Market Shocks on Stock Returns in Major Oil-Exporting Countries: A Markov Switching Approach

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