FEEM working papers "Note di lavoro"
Date: 12/11/2015

Global Oil Market and the U.S. Stock Returns

Maryam Ahmad (Lombardy Advanced School of Economic Research LASER); Matteo Manera (University of Milan-Bicocca, Fondazione Eni Enrico Mattei); Mehdi Sadeghzadeh (Bocconi University)
Type: Journal
JEL n.: G1, G12, Q41
JEL: Energy
Pages: Vol. 114, Pages 1277–1287
Keywords: Oil Market, Oil Price, Stock Market


This paper provides an analysis of the link between the oil market and the U.S. stock market returns at the aggregate as well as industry levels. We empirically model oil price changes as driven by speculative demand shocks along with consumption demand and supply shocks in the oil market. We also take into account in our model all the factors that affect stock market price movements over and above the oil market, in order to quantify the pure effect of oil price shocks on returns. The results show that stock returns respond to oil price shocks differently, depending on the causes behind the shocks. Impulse response analysis suggests that consumption demand shocks are the most relevant drivers of the stock market return, relative to other oil market driven shocks. Industry level analysis is performed to control for the heterogeneity of the responses of returns to oil price changes. The results show that both cost side and demand side effects of oil price shocks matter for the responses of industries to oil price shocks. However, the main driver of the variation in industries’ returns is the shock to aggregate stock market.


Suggested citation: Maryam Ahmadi, Matteo Manera, Mehdi Sadeghzadeh, Global oil market and the U.S. stock returns, Energy, Volume 114, 1 November 2016, Pages 1277-1287, ISSN 0360-5442, http://dx.doi.org/10.1016/j.energy.2016.08.078

Download file
Download file

FEEM Newsletter & Update

Subscribe to stay connected.

Your data will be processed by FEEM - Eni Enrico Mattei Foundation - Data Controller - to receive the Foundation's Newsletter & Update via e-mail. To send the requested information, the Data Controller uses e-mail sending service providers established in the U.S.A .: for this, your consent to the transfer of your email address to the U.S.A. is required, without which it will not be possible to comply with your request. We invite you to consult the complete information to obtain detailed information to protect your rights.