Oil price shocks and the asymmetric response of the stock market
DOI:
https://doi.org/10.11606/issn.1982-6486.rco.2018.147878Keywords:
Oil price, Stock market, AsymmetryAbstract
The stock market may respond in different ways to oil price shocks. According to most studies, this relation may be directly proportional or not. Otherwise some studies, point out that there are a number of characteristics that interfere in this relation. And affirm that, this relation is asymmetric. Considering this perspective, this article proposes an alternative empirical strategy to analyze the impact of the oil price shocks on the stock market return. In contrast to previous traditional aspects based on the assumptions of a symmetric adjustment between variables, the results of this research indicate that oil price shocks (asymmetric) occur mainly when the performance of equity markets becomes better or worse. This indicates that the relationship between the price of oil and the return on the stock market is more related to the expectations of investors' optimism and pessimism than to other characteristics previously suggested in the literature.
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