Oil and stock returns: Frequency domain evidence
Journal of International Financial Markets, Institutions and Money, 2013, vol. 23, issue C, 1-11
This paper examines the relation between oil price changes and stock returns. By using recently developed frequency domain methods, the study shows that there is significant time variation in the linkage between oil and equities. Oil price shocks with less than 12-month persistency have a negative impact on stock returns, while shocks with persistency between 12 and 36 months are associated with positive stock returns. Hence, the analysis supports the view that not all oil price movements are alike and, and joint rises in oil and stock market can in fact be observed. The implications of the findings for participants in financial markets and policy makers are discussed.
Keywords: Oil; Frequency domain tests; Stock returns (search for similar items in EconPapers)
JEL-codes: G1 F4 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:23:y:2013:i:c:p:1-11
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