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THE IMPACT OF OIL PRICE SHOCKS ON THE U.S. STOCK MARKET *
Author(s) -
Kilian Lutz,
Park Cheolbeom
Publication year - 2009
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/j.1468-2354.2009.00568.x
Subject(s) - economics , demand shock , supply shock , oil supply , stock (firearms) , stock market , oil price , monetary economics , supply and demand , shock (circulatory) , crude oil , microeconomics , monetary policy , mechanical engineering , paleontology , medicine , horse , petroleum engineering , biology , engineering
It is shown that the reaction of U.S. real stock returns to an oil price shock differs greatly depending on whether the change in the price of oil is driven by demand or supply shocks in the oil market. The demand and supply shocks driving the global crude oil market jointly account for 22% of the long‐run variation in U.S. real stock returns. The responses of industry‐specific U.S. stock returns to demand and supply shocks in the crude oil market are consistent with accounts of the transmission of oil price shocks that emphasize the reduction in domestic final demand.