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    Do structural oil-market shocks affect stock prices?

    Access Status
    Fulltext not available
    Authors
    Apergis, Nicholas
    Miller, S.
    Date
    2009
    Type
    Journal Article
    
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    Citation
    Apergis, Nicholas and Miller, Stephen M. 2009. Do structural oil-market shocks affect stock prices? Energy Economics. 31 (4): pp. 569-575.
    Source Title
    Energy Economics
    DOI
    10.1016/j.eneco.2009.03.001
    ISSN
    0140-9883
    URI
    http://hdl.handle.net/20.500.11937/2850
    Collection
    • Curtin Research Publications
    Abstract

    This paper investigates how explicit structural shocks that characterize the endogenous character of oil price changes affect stock-market returns in a sample of eight countries — Australia, Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. For each country, the analysis proceeds in two steps. First, modifying the procedure of Kilian [Kilian, L., (forthcoming). Not All Oil Price Shocks are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market. American Economic Review.], we employ a vector error– correction or vector autoregressive model to decompose oil-price changes into three components: oil-supply shocks, global aggregate-demand shocks, and global oil-demand shocks. The last component relates to specific idiosyncratic features of the oil market, such as changes in the precautionary demand concerning the uncertainty about the availability of future oil supplies. Second, recovering the oil-supply shocks, global aggregate-demand shocks, and global oil-demand shocks from the first analysis, we then employ a vector autoregressive model to determine the effects of these structural shocks on the stock market returns in our sample of eight countries. We find that international stock market returns do not respond in a large way to oil market shocks. That is, the significant effects that exist prove small in magnitude.

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