Oil shocks and oil stocks: evidence from the 1970s

Al-Mudhaf, Anwar; Goodwin, Thomas

doi:10.1080/00036849300000023

Cited by 58 publications

(29 citation statements)

References 11 publications

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“…This result is evidence that the oil price is an important variable that enhances stock returns. This result corroborates studies that have reported a positive relationship between stock returns and the oil price (Al-Mudhaf and Goodwin 1993;Gjerde and Saettem 1999;Hammoudeh and Li 2004). Furthermore, the results of the GARCH model indicate that oil price volatility has a significant negative effect in the pre-crisis period, but the effect is significantly positive in the post-crisis period.…”

Section: Garch and Egarch Modelssupporting

confidence: 82%

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Dynamics of oil price shocks and stock market behavior in Pakistan: evidence from the 2007 financial crisis period

Jebran

Chen

Saeed³

et al. 2017

Financ Innov

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Background: The aim of this study is to investigate the effect of the oil price and its volatility on the stock market of Pakistan before and after the 2007 financial crisis period. Methods: The analyses are carried out on daily data for the period from July 31, 2000 to July 31, 2014. This study uses several econometric techniques for the analyses, namely, the Johansen-Juselius cointegration test, generalized autoregressive conditional heteroskedasticity (GARCH) model, exponential generalized autoregressive conditional heteroskedasticity (EGARCH) model, variance decomposition method, and impulse response function. Results: The results of the cointegration method indicate a significant long-run association between stock market and oil prices in the pre-crisis period. The EGARCH model shows that oil price returns have a significant effect on stock market returns in both sub-periods, while the result for the GARCH model is significant only in the postcrisis period. We find a significant effect of oil price volatility on the stock market in both sub-periods from the GARCH model. Furthermore, the EGARCH model shows an asymmetric effect of oil price volatility on the stock market in the pre-crisis period. Variance decomposition shows that stock market variations are mostly explained by selfinnovation. Moreover, the impulse response function results show that oil price shocks affected the stock market adversely in the pre-crisis period but positively in the postcrisis period. Conclusions: This study suggests that economic policymakers and investors should consider the oil price as an important factor affecting stock market returns.

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Section: Garch and Egarch Modelssupporting

confidence: 82%

“…Al-Mudhaf and Goodwin (1993) reported positive effects of an oil price shock on the returns of 29 oil company stocks listed on the NYSE. Gjerde and Saettem (1999) studied the association between macroeconomic factors and stock returns in Norway, and found significant positive effects of oil price fluctuations on financial markets.…”

Section: Literature Reviewmentioning

confidence: 99%

Dynamics of oil price shocks and stock market behavior in Pakistan: evidence from the 2007 financial crisis period

Jebran

Chen

Saeed³

et al. 2017

Financ Innov

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“…Such models have been widely used in the literature (e.g. Al-Mudhaf and Goodwin, 1993;Faff and Brailsford, 1999;Sadorsky 2001). We assume that transport sector returns are composed of two components, namely an oil price factor and a global market component not explained by the oil price factor.…”

Section: The Data and Empirical Designmentioning

confidence: 99%

Oil prices and transport sector returns: an international analysis

Nandha

Brooks

2009

Rev Quant Finan Acc

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“…Using regression analysis, Al-Mudhaf and Goodwin (1993) and Huang, Masulis, and Stoll (1996) find no relationship between oil prices and broad-based U.S. stock returns (as represented by the S&P 500) but provide some evidence that oil futures prices have a direct impact on oil sector stock prices. In contrast, Sadorsky (1999) and Papapetrou (2001) report significant relationships between oil prices and broad-based stock returns.…”

Section: Literature Reviewmentioning

confidence: 99%

The Dynamics of Oil and Stock Prices Comovements

Gilmore¹,

McManus²,

Sharma³

et al. 2015

International Journal of Financial Research

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The dynamic relationships between crude oil prices, oil sector stock price indices and stock market price indices is examined and evidence of cointegration between these variables is found. A vector error-correction (VEC) model reveals that the stock prices of companies in the integrated oil and gas sector have a long-run negative relationship with oil prices while those in the oil and gas exploration and production sector have a long-run positive relationship with oil prices. Both indices have a long-run relationship with mid-and small-capitalization stock prices. However, following shocks to oil sector indices, oil prices tends to restore the long-term equilibrium. These findings should be useful to investors in their attempts at appropriately structure their overall portfolios.

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Oil shocks and oil stocks: evidence from the 1970s

Cited by 58 publications

References 11 publications

Dynamics of oil price shocks and stock market behavior in Pakistan: evidence from the 2007 financial crisis period

Dynamics of oil price shocks and stock market behavior in Pakistan: evidence from the 2007 financial crisis period

Oil prices and transport sector returns: an international analysis

The Dynamics of Oil and Stock Prices Comovements

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