Interdependence between WTI Crude Oil Prices and the US Equity Market

Abstract

The author checks the cointegration between WTI oil market and the US market of stocks represented by the S&P index. As it turns out not to exist, short-term relations are investigated. The study confirms that crude oil market significantly influences the stock market in the short run, however it does not give an unambigous answer if this impact is made by oil itself or together with the GBP/USD currency rate. Furthermore, the relation does not go in another direction which means that the stock market has no impact on the oil market. The Unrestricted Vector Autoregression model is built. The author uses weekly data and the research period is from April 1990 to May 2021. The study implies that stable crude oil prices are desirable in order not to destabilize stock markets whose instability threatens the real economy. Conclusions are vital for a wide group of entities such as policy makers, authorities, institutional and individual investors, as well as other financial market participants.

Analysis of the effect of Energy Prices on Stock Indexes During the Epidemic Crisis

“…(Samanta and Zadeh, 2012;Partalidou et al, 2016;Raza et al, 2016;Arfaoui and Rejeb, 2017;Wei and Guo, 2017;Karhan and Aydın, 2018;Pandey and Vipul, 2018;Alio et al, 2019;Singhal et al, 2019;Kumar et al, 2019;Majidli and Guliyev, 2020;Kumar et al, 2021;Kumau et al, 2020;Gherghina et al, 2020;Humbatova et al, 2020;Karakuş, 2021). Some of the empirical studies employed vector autoregressive model (VAR) (Ding et al, 2016;Chkili, 2022;Grabias, 2022;Nairobi et al, 2022;Kelesbayev et al, 2022). However, not a single study was able to explain the specific relationship between gold, crude oil, and the stock market (Uthumrat, 2022 p.…”