2016
DOI: 10.1080/00036846.2016.1221045 View full text |Buy / Rent full text
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Abstract: This article investigates the causal impact of oil prices on stock prices in each G7 market as well as in the world market. An asymmetric causality test is used for this purpose. Since the underlying data appears to be non-normal with time-varying volatility, we use bootstrap simulations with leverage adjustments in order to produce more reliable critical values than the asymptotic ones. Based on symmetric causality tests, we find no causal effect of oil prices on the stock prices of the world market or any of… Show more

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“…Our results are also in line with those provided by Ajmi et al (2014), Anoruo (2011), Arouri & Nguyen (2010), Ciner (2001) and Ding et al (2016) find significant bidirectional Granger causality between oil price and equity markets employing a number of methodological approaches, although these latter studies do not consider various investment horizons. In contrast, our findings in terms of causality relationships differs from that reported by, among others, Balcilar & Ozdemir (2013), Dagher & El Hariri (2013), Hatemi-J et al (2017) and Lee et al (2012). The dissimilarities between the results of these studies and ours may be attributed to the use of different Granger causality procedures, time periods and data frequency.…”
Section: Time-varying Granger Causality Tests In Mean and Variancecontrasting
“…Instead, Ciner (2001) has tested for nonlinear causal linkages between oil prices and stock returns using the Hiemstra-Jones nonlinear causality test, while Ajmi et al (2014) and Anoruo (2011) have applied the nonlinear asymmetric causality test proposed by Kyrtsou & Labys (2006). In a similar vein, Hatemi-J et al (2017) have utilized the asymmetric causality test developed by Hatemi-J. (2012).…”
Section: Literature Reviewmentioning
“…Early studies of the impact of oil prices on aggregate stock returns are limited to specific countries, with mixed findings. Some studies find a positive relationship (Narayan and Narayan 2010;Zhu et al 2011;Zhu et al 2014;Silvapulle et al 2017), others find a negative relationship (Gjerde and Saettem 1999;Sadorsky 1999;Papapetrou 2001;Basher and Sadorsky 2006;Driesprong et al 2008;Park and Ratti 2008;Chen 2009;Filis 2010;Basher et al 2012), and still others find no relationship (Huang et al 1996;Cong et al 2008; Apergis and Miller 2009;Miller and Ratti 2009;Reboredo and Rivero-Castro 2014;Hatemi et al 2017). These conflicting results may arise owing to several underlying pitfalls in the studies, such as not considering the level of oil dependence among stock markets, not explicitly considering heterogeneity in the context in which the aggregate index is exposed to gains or losses from changes in the oil price, the nature of the oil price shock considered, and the time-varying element used (Smyth and Narayan 2018).…”
Section: Introductionmentioning
“…On this aspect study by Hatemi et al . () significant differences among the response of stock markets to oil shocks in the US, Japan and Germany. Concomitantly, it lead us to reach a consensus that the oil–stock interaction is time‐varying and characterized by complexity and non‐linearity making relevant research difficult; this is caused by the intricate components of the entire market from a variety of time horizons.…”
Section: Nexus Between Oil Prices and Stock Marketmentioning
“…Perhaps, this investigation in the context of UK is also important in the light of the argument put forward by Park and Ratti () and most lately by Hatemi et al . (), that the impact of oil prices varies country to country. There has been no significant study which has looked at the association between oil price shocks and the stock market in the context of the symmetry of response between the oil sector stock and overall stock market in the UK.…”
Section: Introductionmentioning