On the identification of the oil-stock market relationship

Ioannis Arampatzidis and Theodore Panagiotidis

Economic Modelling, 2023, vol. 120, issue C

Abstract: The alternative identification techniques for oil market shocks could be responsible for the mixed results in the oil-stock market literature. This study employs a Bayesian Structural Vector Autoregression (SVAR) to compare the implications of traditional identification approaches (SVAR with zero/sign restrictions) with those from the baseline model (Bayesian SVAR) for the case of the US. We find that the baseline model implies more plausible posterior price elasticities of oil supply and demand and a more profound effect of oil supply shocks on oil prices. Nonetheless, all models provide qualitatively similar conclusions for the effects of oil market shocks on the US stock market, with shocks coming from the demand side playing a more important role than oil supply shocks. Overall, this study reveals that traditional identification schemes remain a good approximation in practice for the oil-stock market relationship.

Keywords: Bayesian SVAR; Identification; Oil market shocks; Stock market; US industries (search for similar items in EconPapers)
JEL-codes: C32 G15 Q43 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0264999322003947
Full text for ScienceDirect subscribers only

Related works:
Working Paper: On the identification of the oil-stock market relationship (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:120:y:2023:i:c:s0264999322003947

DOI: 10.1016/j.econmod.2022.106157

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Catherine Liu ().