How does stock market volatility react to oil shocks?

Andrea Bastianin and Matteo Manera ()

Abstract: We study the impact of oil price shocks on the U.S. stock market volatility. We jointly analyze three different structural oil market shocks (i.e., aggregate demand, oil supply, and oil-specific demand shocks) and stock market volatility using a structural vector autoregressive model. Identification is achieved by assuming that the price of crude oil reacts to stock market volatility only with delay. This implies that innovations to the price of crude oil are not strictly exogenous, but predetermined with respect to the stock market. We show that volatility responds significantly to oil price shocks caused by unexpected changes in aggregate and oil-specific demand, whereas the impact of supply-side shocks is negligible.

Date: 2018-11
New Economics Papers: this item is included in nep-ene and nep-fmk
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Citations: View citations in EconPapers (31)

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http://arxiv.org/pdf/1811.03820 Latest version (application/pdf)

Related works:
Journal Article: HOW DOES STOCK MARKET VOLATILITY REACT TO OIL PRICE SHOCKS? (2018)
Working Paper: How Does Stock Market Volatility React to Oil Shocks? (2015)
Working Paper: How Does Stock Market Volatility React to Oil Shocks? (2015)
Working Paper: How Does Stock Market Volatility React to Oil Shocks? (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1811.03820

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