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Revisiting the Effect of Crude Oil Price Movements on US Stock Market Returns and Volatility

Ralph Sonenshine and Michael Cauvel

No 2017-01, Working Papers from American University, Department of Economics

Abstract: From mid-2014 to 2016, oil prices plunged rapidly causing significant volatility in the US and global equity markets. This change in crude oil prices occurred after a significant run up in oil prices three to four years earlier. Each change in the growth trajectory of oil prices affects stock market returns. How and why do oil price shocks affect the expected stock market returns among key sectors of the economy? This paper explores this issue by examining how the magnitude of crude oil price changes affect the stock market returns and variances of key producing, banking and consuming segments of the US economy. Our findings provide some explanations for the asymmetric responses to positive and negative oil shocks found in these key sectors of the economy.

Keywords: Deregulation; mergers; regulated industries; natural monopoly (search for similar items in EconPapers)
JEL-codes: G14 G34 L94 L98 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-ene and nep-fmk
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https://doi.org/10.17606/gz94-d845 First version, 2017 (application/pdf)

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