Asymmetric Impact of Oil Price Changes on Stock Prices: Evidence from Country and Sectoral Level Data

Sujata Saha ()
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Sujata Saha: Wabash College

Journal of Economics and Finance, 2022, vol. 46, issue 2, No 1, 237-282

Abstract: Abstract This paper examines the symmetric and asymmetric effects of oil price changes on stock prices using the linear and non-linear Autoregressive Distributed Lag (ARDL) approach to cointegration and error-correction modeling. For the country-level analysis, monthly data from Brazil, Canada, Chile, Japan, S. Korea, Malaysia, Mexico, the U.K., and the U.S. have been considered. The results show that oil price changes have asymmetric effects on stock prices mostly in the short run. To dig deeper into the asymmetric relationship between oil and stock prices, I disaggregate data at the sectoral level by focusing on eleven U.S. sectoral stock indices to investigate the performance of different sectors. This helps solve the problem of aggregation bias that is associated with country-level data. The findings show that changes in oil price have significant asymmetric effects in nine out of the eleven sectors in the short run. In most of these sectors, the short run asymmetric relationship translates into the long run.

Keywords: Oil price; Stock prices; Nonlinear ARDL; Asymmetry; Sectoral stock prices (search for similar items in EconPapers)
JEL-codes: F31 G12 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s12197-021-09559-3

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