Oil price shocks and stock market returns: New evidence from the United States and China

David Broadstock and George Filis

Journal of International Financial Markets, Institutions and Money, 2014, vol. 33, issue C, 417-433

Abstract: This study examines the time-varying correlations between oil prices shocks of different types (supply-side, aggregate demand and oil-market specific demand as per Kilian (2009) who highlighted that “Not all oil shocks are alike”) and stock market returns, using a Scalar-BEKK model. For this study we consider the aggregate stock market indices from two countries, China and the US, reflecting the most important developing and developed financial markets in the world. In addition to the whole market, we also consider correlations from key selected industrial sectors, namely Metals & Mining, Oil & Gas, Retail, Technology and Banking. The sample period runs from 1995 until 2013. We highlight several key points: (i) correlations between oil price shocks and stock returns are clearly and systematically time-varying; (ii) oil shocks of different types show substantial variation in their impact upon stock market returns; (iii) these effects differ widely across industrial sectors; and finally (iv) China is seemingly more resilient to oil price shocks than the US.

Keywords: Oil price shocks; Time-varying correlation; Chinese stock market; US stock market; Industrial sectors; Scalar-BEKK (search for similar items in EconPapers)
JEL-codes: C32 G12 G14 Q4 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (210)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:33:y:2014:i:c:p:417-433

DOI: 10.1016/j.intfin.2014.09.007

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