New insights into the US stock market reactions to energy price shocks

Abstract

This paper investigates the relationship between S&P 500 prices, viewed as a US economic barometer, and a set of energy prices, including WTI, gasoline, heating, diesel and natural gas prices, using the Quantile Autoregressive Distributed Lags (QARDL) model recently developed by Cho et al. (2015). The empirical results show a negative long-and shortrun relationship between WTI crude oil and Henry Hub natural gas prices on the one side and S&P 500 stock prices on the other side, only for medium and high quantiles. The findings of Wald tests indicate a nonlinear and asymmetric pass-through from energy price shocks to aggregate US stock market prices. These results show that crude oil and natural gas are key economic variables to explain short run and long run stock market dynamics. They provide further insights into how energy price shocks are transmitted to stock market prices.

The Oil Market Reactions to OPEC’s Announcements

“…Since the seminal work by Draper [7], abundant papers have explored how announcements or major events are impounded into financial asset prices [8][9][10][11][12]. However, little literature deals with the price reactions to the different types of OPEC's announcements based on the event study methodology.…”

On the Linkage between the Energy Market and Stock Returns: Evidence from Romania

“…A ij . Many researchers [1,10,26,30,36,39,40,59,60,64] use the autoregressive-distributed lag model (ARDL) and the bounds testing methodology because these models can be used with a mixture of I(0) and I(1) data. In our study, we have both stationary and non-stationary variables so this approach will help in our research.…”

“…Singh [60] provided evidence that capital investment and foreign direct investment (FDI) promote economic growth in India for the period of 1970 to 2012 through an ARDL cointegration approach, whereas Paramati et al [61] documented that output, FDI inflows, and stock markets positively influence clean energy consumption. Benkraiem, Lahiani, Miloudi, and Shahbaz [30] used the quantile autoregressive distributed lags (QARDL) model and found that the medium quantiles are negative and there is a significant short-term connection between WTI crude oil and S&P 500 stock prices, as well as between Henry Hub natural gas prices and S&P 500 stock prices. For the case of Turkey, Tursoy and Faisal [41] concluded that gold prices cause stock prices in short-term, long-term, and joint forms, and crude oil also positively influences stock prices, but no proof of causality between stock prices and crude oil was found.…”

“…The energy market can undoubtedly be a driver of economic growth and job creation in a developing country, such as Romania. Previous examinations were undertaken for African stock markets [20,23], Asian countries [6,14,15,[24][25][26][27][28], European nations [18,29], the US stock market [1,16,[30][31][32], Egypt [33], Gulf states [7,34,35], India [36], Islamic stocks [19], Lebanon [37], Mexico [38,39], and Turkey [40,41]. To the best of our knowledge, this is the first investigation to examine the linkage between the energy market and the Romanian stock market.…”

Oil Price Shocks and Sectoral Stocks Behaviour in Nigeria: How Relevant is Asymmetry and Structural Breaks?

“…Overtime, the major interest in this study has basically been on global and national scales respectively. While studies like Jones and Kaul (1996), Lean and Badeeb 2017, Bastianin et al (2017), Broadstock and Filis (2014), Dutta (2017), Ftiti (2015), Gupta (2016, Kayalar et al (2017), Sharmar (2017), , Silvapulle et al 2017and Khalifa (2017) analyse either on a panel or country by country basis, studies like Cong et al (2008), Fowowe (2013), Benkraiem et al (2018), Zheng and Su (2017), Bams et al (2017), , Bouri et al (2016), Gil-Alana and Yaya (2014), Henriques and Sadorsky (2008), Huang et al (2017), Tule et al (2017), Tursol and Faisal (2017), Guo (2017), andSoyemi et al (2017) carry out the study nationally.…”