On the identification of the oil-stock market relationship

Ioannis Arampatzidis and Theodore Panagiotidis

Working Paper series from Rimini Centre for Economic Analysis

Abstract: The alternative identification techniques for oil market shocks could be responsible for the mixed results in the oil-stock market literature. This study employs a Bayesian Structural Vector Autoregression (SVAR) to compare the implications of traditional identification approaches (SVAR with zero/sign restrictions) with those from the baseline model (Bayesian SVAR) for the case of the US. We find that the baseline model implies more plausible posterior price elasticities of oil supply and demand and a more profound effect of oil supply shocks on oil prices. Nonetheless, all models provide qualitatively similar conclusions for the effects of oil market shocks on the US stock market, with shocks coming from the demand side playing a more important role than oil supply shocks. Overall, this study reveals that traditional identification schemes remain a good approximation in practice for the oil-stock market relationship.

Keywords: Bayesian SVAR; Identification; Oil market shocks; Stock market; US industries (search for similar items in EconPapers)
JEL-codes: C32 G15 Q43 (search for similar items in EconPapers)
Date: 2022-12
New Economics Papers: this item is included in nep-ene
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://rcea.org/RePEc/pdf/wp22-15.pdf

Related works:
Journal Article: On the identification of the oil-stock market relationship (2023)
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:rim:rimwps:22-15

Access Statistics for this paper

More papers in Working Paper series from Rimini Centre for Economic Analysis Contact information at EDIRC.
Bibliographic data for series maintained by Marco Savioli ().