TITLE:
Revisiting the Effect of Crude Oil Price Movements on US Stock Market Returns and Volatility
AUTHORS:
Ralph Sonenshine, Michael Cauvel
KEYWORDS:
Abnormal Returns, Event Study, Oil Shocks
JOURNAL NAME:
Modern Economy,
Vol.8 No.5,
May
23,
2017
ABSTRACT: From mid-2014 to 2016, oil prices plunged rapidly
causing significant volatility in the US and global equity markets. This change
in crude oil prices occurred after a significant run up in oil prices three to
four years earlier. Each change in the growth trajectory of oil prices affects
stock market returns. How and why do oil price shocks affect the expected stock
market returns among key sectors of the economy? This paper explores this issue
by examining how the magnitude of crude oil price changes affects the
stock market returns and variances of key producing, banking and consuming
segments of the US economy. Our findings provide some explanations for the
asymmetric responses to positive and negative oil shocks found in these key
sectors of the economy.