The Influence of Oil Prices on Stock Market Returns: Empirical Evidence from Oil Exporting and Oil Importing Countries

Abstract

The aim of this paper is to study the impact of oil price fluctuations on the stock markets and the interest rates from oil importing and oil exporting countries. To this end, Vector Autoregressive (VAR) models are estimated and pairwise Granger Causality tests are performed to the stationary series in order to analyse the short-term relationships among the variables. Also, the Johansen approach for multiple equations is carried out in order to test for cointegration among the series. Finally, the existence of cointegration set the estimation of Vector Error-Correction Models (VECMs) to investigate the long-term links between the financial variables and the oil prices. The major findings of this paper include: first, the interaction between the oil prices and the stock markets is much stronger than with the interest rates in the short and in the long-run. Second, the impact on oil importing countries is more significant than on oil exporting countries. Finally, it might be possible that the fluctuations in oil prices have different effects on developed and developing countries.

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“…Hayo and Kutan (2005) showed that the fluctuations in the oil prices destabilize the Russian stock exchange. Asteriou et al (2013) found that the oil prices predict the Russian stock prices just like in the other oil exporting countries. The study of Chung and Shih (2014) showed that the increases in the oil prices caused by the precautionary demand shocks also increase the prices of Russian stocks.…”

Emtia Oynaklık Endeksleri ve Fed Faiz Oranlarının Gelişen Ülkelerin Borsa Endekslerine Etkisi

“…(Basher and Sadorsky, 2006;Bjornland, 2008;Kilian and Park, 2007;Rati and Park, 2007;Mohanty et al, 2011;Tsai, 2015;Kang et al, 2016). Asteriou et al (2013), for the countries that export/import oil, examined the relation between the fluctuations in the oil prices and stock markets and interest rates using the VAR model and the Granger Causality test. According to this approach, they have concluded that the short and long term oil prices and stock market relationship is stronger than interest rates and the stock market relationship.…”

Oil Prices and Stock Markets: Further Evidence from Newly Industrialized Countries

“…According to the results of the impact-response analysis, stock prices were responding negatively to a positive oil price shock, while oil prices were positively responding to a positive emerging market shock. Asteriou, Dimitras and Lendewig (2013) examined the effects of fluctuations in oil prices on stock market and interest rates in oil exporting and importing countries. 18 oil importing countries and 13 oil exporting countries for the period 1988-2008 were included in the study.…”