Dynamic correlation between stock market and oil prices: The case of oil-importing and oil-exporting countries

George Filis, Stavros Degiannakis and Christos Floros

MPRA Paper from University Library of Munich, Germany

Abstract: The paper investigates the time-varying correlation between stock market prices and oil prices for oil-importing and oil-exporting countries. A DCC-GARCH approach is employed to test the above hypothesis based on data from six countries; Oil-exporting: Canada, Mexico, Brazil and Oil-importing: USA, Germany, Netherlands. The contemporaneous correlation results show that i) although time-varying correlation does not differ for oil-importing and oil-exporting economies, ii) the correlation increases positively (negatively) in respond to important aggregate demand-side (precautionary demand) oil price shocks, which are caused due to global business cycle’s fluctuations or world turmoil (i.e. wars). Supply-side oil price shocks do not influence the relationship of the two markets. The lagged correlation results show that oil prices exercise a negative effect in all stock markets, regardless the origin of the oil price shock. The only exception is the 2008 global financial crisis where the lagged oil prices exhibit a positive correlation with stock markets.

Keywords: oil prices; stock market returns; DCC-GARCH; dynamic correlation (search for similar items in EconPapers)
JEL-codes: C32 C51 G15 Q43 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (465)

Published in International Review of Financial Analysis 20.3(2011): pp. 152-164

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/96299/1/MPRA_paper_96299.pdf original version (application/pdf)

Related works:
Journal Article: Dynamic correlation between stock market and oil prices: The case of oil-importing and oil-exporting countries (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:96299

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().