EQUITY AND OIL MARKETS UNDER EXTERNAL SHOCKS

Jorge Urrutia and Anastasios Malliaris

Chapter 19 in Economic Uncertainty, Instabilities and Asset Bubbles:Selected Essays, 2005, pp 309-322 from World Scientific Publishing Co. Pte. Ltd.

Abstract: AbstractThe chapter investigates two hypotheses: first, that the impact of the Persian Gulf Crisis was stronger on the oil market than in the equity market; and, second, that there was an increase in the causal relationship between stock and oil prices during the crisis. Event-study and Granger causality tests confirm both hypotheses. The acceptance of the first hypothesis is consistent with the nature of the conflict which primarily affected the oil market due to the embargo of Iraqi oil. Also, the high degree of diversification of the S&P 500 index lessened the impact of higher oil prices. The confirmation of the second hypothesis agrees with efficient markets in the sense that equity and oil markets reacted quickly and simultaneously to the event.

Keywords: Asymptotic Economic Growth; Inflation; Interest Rates; Asset Pricing; Equity Markets; Foreign Currency; Monetary Policy; Crash (search for similar items in EconPapers)
JEL-codes: C58 C73 E31 E37 E43 G12 G17 (search for similar items in EconPapers)
Date: 2005
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