 Oil prices, stock returns, and exchange rates: Empirical evidence from China and the United StatesShuming Bai and Kai S. Koong The North American Journal of Economics and Finance, 2018, vol. 44, issue C, 12-33 Abstract: Employing the diagonal BEKK model as well as the dynamic impulse response functions, this study investigates the time-varying trilateral relationships among real oil prices, exchange rate changes, and stock market returns in China and the U.S. from February 1991 to December 2015. We highlight several key observations: (i) oil prices respond positively and significantly to aggregate demand shocks; (ii) positive oil supply shocks adversely and significantly affect the Chinese stock market; (iii) oil price shocks persistently and significantly impact the trade-weighted US dollar index negatively; (iv) the US and China stock markets correlate positively just as the dollar index and the exchange rate does; (v) a significant parallel inverse relation exists between the US stock market and the dollar and between the China stock market and the exchange rate; and (vi) the Chinese stock market is more volatile and responsive to aggregate demand and oil price shocks than the US stock market in recent years. Keywords: Diagonal BEKK; Oil prices; Stock markets; Exchange rates; Impulse response; Function; Dynamic correlation (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:44:y:2018:i:c:p:12-33 DOI: 10.1016/j.najef.2017.10.013 Access Statistics for this article The North American Journal of Economics and Finance is currently edited by Hamid Beladi More articles in The North American Journal of Economics and Finance from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.