Does oil move equity prices? A global view

Nandha, Mohan Singh; Faff, Robert W.

doi:10.1016/j.eneco.2007.09.003

Cited by 499 publications

(265 citation statements)

References 27 publications

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“…But Cong, Wei, Jiao, & Fan (2008) showed that oil price shocks or volatility has no statistically significant effect on the real stock returns of most Chinese stock market indices, except on some manufacturing indices and indices of some oil companies. Another study by Nandha and Faff (2008) also indicated that increase in oil price has a negative effect on stock returns for most sectors except mining and some related industries such as oil and gas industries. In addition, Sadorsky (2008) showed that increases in firm size or oil prices reduce stock market price returns, and increases in oil prices have more impact on stock market returns than decreases in oil prices do.…”

Section: Literature Reviewmentioning

confidence: 98%

The Role of Macroeconomic Variables on Stock Market Index in China and India

Hosseini¹,

Ahmad²,

Lai³

2011

IJEF

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This paper investigates the relationships between stock market indices and four macroeconomics variables, namely crude oil price (COP), money supply (M2), industrial production (IP) and inflation rate (IR) in China and India. The period covers in this study is between January 1999 to January 2009. Using the Augmented Dickey-Fuller unit root test, the underlying series are tested as non-stationary at the level but stationary in first difference. The use of Johansen-Juselius (1990) Multivariate Cointegration and Vector Error Correction Model technique, indicate that there are both long and short run linkages between macroeconomic variable and stock market index in each of these two countries.

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Section: Literature Reviewmentioning

confidence: 98%

The Role of Macroeconomic Variables on Stock Market Index in China and India

Hosseini¹,

Ahmad²,

Lai³

2011

IJEF

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“…Oil price hikes have a negative impact on stock returns but drops in oil prices do not necessarily have a positive impact. However studies such as Park and Ratti [15] and Nandha and Faff [3] do not find evidence on asymmetric effects in stock markets. Some explanations regarding the asymmetry puzzle come from investment uncertainty or sectoral shift channels.…”

Section: Source: Energy Information Administration (Eia) Internationamentioning

confidence: 99%

“…Hence, positive crude oil price shocks would negatively affect the cash flows and market values of companies. Since asset prices are regarded as the discounted value of future firms' earnings or cash flows, thus such negative effects on firms' performance would cause an immediate decline in the overall stock market returns (Huang et al [2], Nandha and Faff [3]). According to Huang et al [2], the rising oil prices, on one hand, in the absence of complete substitution affects the factors of production, resulting in increased costs relating to business operations.…”

Section: Introductionmentioning

confidence: 99%

Oil Price Fluctuations and Firm Performance in an Emerging Market: Assessing Volatility and Asymmetric Effect

Janor¹,

Abdul-Rahman²,

Housseinidoust³

et al. 2013

JOEBM

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Abstract-This study examines the impact of oil price volatility on firm performance in the context of an emerging market, Malaysia. The effect of crude oil price on the performance is examined for the period of January 1986 to December 2011 using GARCH and EGARCH models reflecting the evaluation on volatility and asymmetric effects. Results indicate the significant effect of oil price volatility on stock market volatility and also the asymmetric effects. For policy makers, the findings help to clarify the dilemma of whether the government should subsidize or totally depend on global oil prices in ensuring the sustainability and competitiveness of Malaysian companies. In addition, the results may assist businessmen in managing cost structures in the event of rising oil prices in relation to both short term and long term planning and provide investors with a better picture of the exposure to oil price risks when investing in Malaysian companies.

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“…A negative association between oil price shocks and stock market returns has been reported in several recent papers. Nandha and Faff (2008) find oil prices rises have a detrimental effect on stock returns in all sectors except mining and oil and gas industries, O'Neil et al (2008) find that oil price increases lead to reduced stock returns in the United States, the United Kingdom and France, and Park and Ratti (2008) report that oil price shocks have a statistically significant negative impact on real stock returns in the U.S. and 12 European oil importing countries. 2 In new strands in the literature, Kilian and Park (2007) report that only oil price increases driven by precautionary demand for oil over concern about future oil supplies negatively affect stock prices, and Gogineni (2007) finds that industry stock price returns depends on demand and cost side reliance on oil and on size of oil price changes.…”

Section: Introductionmentioning

confidence: 99%