Discussion Paper

No. 2014-12 | March 20, 2014
Empirical Linkage between Oil Price and Stock Market Returns and Volatility: Evidence from International Developed Markets


This paper examines empirically whether oil price shocks impact stock market returns. Using monthly data for eight developed countries from January 1991 to September 2013, strong negative connections between oil price and stock market returns are found in seven of the selected countries. Oil price changes are without significant effect on the stock market of Singapore. On the volatility of returns, the changes in oil prices are significant for six markets and they have not much effect on the others.

JEL Classification:

G12, Q43


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Cite As

Abderrazak Dhaoui and Naceur Khraief (2014). Empirical Linkage between Oil Price and Stock Market Returns and Volatility: Evidence from International Developed Markets. Economics Discussion Papers, No 2014-12, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2014-12

Comments and Questions

Anonymous - Recommended
March 21, 2014 - 03:00


Massimiliano Caporin - ARCH effects
March 21, 2014 - 08:05

I did not understood if you run the LM-ARCH tests on the mean residuals or on the variance standardized residuals. I guess the first option is the correct one. If I'm correct, you have very mild evidences of GARCH effects, just a handful of p-values between 1% and 5%, and ...[more]

... all the other above 5%. Given that, why did you have estimated a GARCH model? For instance, in the France and Canada cases, there is no ARCH at all. You are thus estimating a model whose results might be influenced by overfitting.

Abderrazak D - LM test
March 24, 2014 - 20:13

The LM Arch test is on mean residuals. The results for the France et Canada are acceptable. These results indcate the absence of Garch effet. A non significant result is also considered as a result. It indicate that the model is not appropriate for the case of these countries. The ...[more]

... conclusion can be to recommand not to use this type of modelling.

Anonymous - Originality and contribution
March 21, 2014 - 23:18

The paper examines a basic relationship with already well known methodologies. The reserach is based on high level of number of countries, but as they are individually examined, the number of countries under examination does not have any add value. The same does for the period/sample size. The economics of ...[more]

... the research is weak. The article is based on interpretation of well known and basic test results without any economic framework. It does not have any material originality and contribution to the literature.
I do not recommend it for publication on a journal indexed by ssci.


Abderrazak D - Methodology
March 24, 2014 - 20:08

The papers contributes with high quality to the litterature by using a good technics. Existing research used cointegration and GARCH models. The EGARCH Model add in the existing litterature the advantage to take into account the asymmetry effect. I find that the decision to not publish this papers is very ...[more]

... hard. In other subjects such day of the week effect for example, the same methodology is used and the papers are published in journal class 1.

Anonymous - Report
April 14, 2014 - 13:24

Dear Authors,

Please find the report on your paper in the PDF version.


Abderrazak D - Reply to the Referee comments
April 19, 2014 - 22:07

This is a revised version based on the referee comments

Samir Zouari - reader comment
April 22, 2014 - 12:08

see attached file

Anonymous - Final revised version
April 26, 2014 - 22:16

Please see the last revised version (second revision).


Anonymous - Referee report
May 05, 2014 - 12:31

see attached file

Anonymous - Referee report 2
May 08, 2014 - 12:21

see attached file