Crude oil and stock markets: Stability, instability, and bubbles ☆

By J. Miller, Ronald A. Ratti. 2009

715 citations recorded by the source corpus.

We analyze the long-run relationship between the world price of crude oil and international stock markets over 1971:1-2008:3 using a cointegrated vector error correction model with additional regressors. Allowing for endogenously identified breaks in the cointegrating and error correction matrices, we find evidence for breaks after 1980:5, 1988:1, and 1999:9. There is a clear long-run relationship between these series for six OECD countries for 1971:1-1980.5 and 1988:2-1999.9, suggesting that stock market indices respond negatively to increases in the oil price in the long run. During 1980.6-1988.1, we find relationships that are not statistically significantly different from either zero or from the relationships of the previous period. The expected negative long-run relationship appears to disintegrate after 1999.9. This finding supports a conjecture of change in the relationship between real oil price and real stock prices in the last decade compared to earlier years, which may suggest the presence of several stock market bubbles and/or oil price bubbles since the turn of the century.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/30661eb1aed110bf8e014f984c7e01a09a4e9e26

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Citations in the corpus

Oil price shocks, economic policy uncertainty and industry stock returns in China: Asymmetric effects with quantile regression (2017, background): “Central banks typically address it by raising the interest rate (Huang et al., 1996; Miller and Ratti, 2009).”
Crude oil shocks and stock markets: A panel threshold cointegration approach (2011, methodology): “Miller and Ratti (2009) analyze the long-run relationship between the world price of crude oil and international stock markets, utilizing a cointegration vector error correction model (VECM) with additional regressors.”
Oil, Gold, US dollar and Stock market interdependencies: A global analytical insight (2017, methodology): “Miller and Ratti (2009), used a VECM with additional regressors for the period 1971 – 2008, and observed that stock market respond negatively to oil shocks in the long run, but this negative”
Oil price and stock returns of consumers and producers of crude oil (2015, background): “I. Introduction There is a large volume of studies that examines the relationship between oil price returns and stock returns (see, inter alia, Arouri, 2011; Park and Ratti, 2008; and Miller and Ratti, 2009).”
Do Financial Investors Destabilize the Oil Price? (2011, background): “…few years led many commentators to reexamine the functioning of the price-setting mechanism in the oil market (Khan 2009, Kaufmann and Ullman 2009, Miller and Ratti 2009 and Lombardi and Mannucci 2011).1 The increasing nancialization of the oil futures markets was blamed by some as the main…”
Dynamic correlation between stock market and oil prices: The case of oil-importing and oil-exporting countries (2011, background): “Miller and Ratti (2009) concluded that oil price effects are insignificant after 1999 due to oil price bubbles which have taken place since the early 2000.”
Oil shocks and stock markets: dynamic connectedness under the prism of recent geopolitical and economic unrest (2017, background): “…interest to understand the effects of oil prices on stock markets (some recent studies include those by Filis and Chatziantoniou, 2014; Asteriou and Bashmakova, 2013; Ciner, 2013; Lee and Chiou, 2011; Laopodis, 2011; Narayan and Sharma, 2011; Filis, 2010; Chen, 2010; Miller and Ratti, 2009).”