Authors: Abderrazak Dhaoui; Khaled Guesmi; Youssef Saidi; Saad Bourouis
Addresses: IPAG Business School (IPAG Lab), Paris, France; Faculty of Economic Sciences & Management, University of Sousse, Sousse, Tunisia ' IPAG Business School (IPAG Lab), Paris, France ' Research Department, Bank Al-Maghrib, Rabat, Morocco ' Institute of Higher Commercial Studies, University of Sousse, Sousse, Tunisia
Abstract: With the recent changes in international financial markets, investors and policy-makers are paying special attention to the relationship between oil price shocks and equity markets. This paper investigates how oil supply and oil demand shocks interact with OECD countries and macroeconomic variables within a cointegration vector error correction framework, which provides extreme flexibility with a parsimonious specification. By defining oil supply and oil demand shocks as endogenous variables, our proposed model allows us to gauge the shock transmission among the system variables through time and investigate the direct and indirect connections between oil price shocks and stock returns. We are also able to observe the long-run relationship between real stock prices and real oil prices measured by world and local prices. Our empirical findings show that the impact of oil price shocks substantially differs among the countries and that the significance of the results differs among the oil price specifications (real national oil price, world oil price, supply shocks and demand shocks).
Keywords: oil price; stock market return; oil supply shocks; oil demand shocks.
International Journal of Global Energy Issues, 2018 Vol.41 No.1/2/3/4, pp.25 - 51
Received: 30 May 2017
Accepted: 29 Sep 2017
Published online: 29 May 2018 *