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[en] 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. (author)
[en] This paper examines the effect of energy price uncertainty on firm-level investment. An error correction model of capital stock adjustment is estimated with data on U.S. manufacturing firms. Higher energy price uncertainty is found to make firms more cautious by reducing the responsiveness of investment to sales growth. The result is robust to consideration of energy intensity by industry. The effect is greater for high growth firms. It must be emphasized that the direct effect of uncertainty is not estimated. Conditional variance of energy price is obtained from a GARCH model. Findings suggest that stability in energy prices would be conducive to greater stability in firm-level investment. (author)
[en] Oil price shocks have a statistically significant impact on real stock returns contemporaneously and/or within the following month in the U.S. and 13 European countries over 1986:1-2005:12. Norway as an oil exporter shows a statistically significantly positive response of real stock returns to an oil price increase. The median result from variance decomposition analysis is that oil price shocks account for a statistically significant 6% of the volatility in real stock returns. For many European countries, but not for the U.S., increased volatility of oil prices significantly depresses real stock returns. The contribution of oil price shocks to variability in real stock returns in the U.S. and most other countries is greater than that of interest rate. An increase in real oil price is associated with a significant increase in the short-term interest rate in the U.S. and eight out of 13 European countries within one or two months. Counter to findings for the U.S. and for Norway, there is little evidence of asymmetric effects on real stock returns of positive and negative oil price shocks for oil importing European countries. (author)
[en] Highlights: • Responses of upstream stock returns to world non-US oil supply shock increase over time. • Responses of upstream stock returns to US oil supply shock are positive and persistent. • Effects of oil supply shocks are asymmetric for independents and integrated firms. • A structural change in the causal relationship between oil market and stock return - Abstract: A time-varying parameter VAR model is used to examine the impact of structural oil supply shocks on the US real stock market return of oil and gas exploration and production companies. The result shows that the impact response of the real return of the upstream stocks to a negative world non-US oil supply shock increases substantially over recent years, from an average value of 0.70% in 2006 to 6.16% during 2008–2010, with a spike of 6.81% in 2014Q3. The endogenous effects of US oil supply shocks on the return play an important role, in that the responses of the stock returns to a negative US oil supply shock are positive and persistent with an average value of 3.60% over time. The time-varying effects of oil supply shocks are heterogeneous. The magnitudes of return responses are different among independents, large proved-reserve independents and integrated companies over time.