Open AccessInterdependence between WTI Crude Oil Prices and the US Equity Market
Author(s) -
Izabela Pruchnicka-Grabias
Publication year - 2022
Publication title -
international journal of energy economics and policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.449
H-Index - 33
ISSN - 2146-4553
DOI - 10.32479/ijeep.12675
Subject(s) - west texas intermediate , cointegration , equity (law) , economics , crude oil , stock market , financial economics , oil storage trade , monetary economics , order (exchange) , stock market index , vector autoregression , oil price , volatility (finance) , econometrics , finance , paleontology , horse , political science , petroleum engineering , law , biology , engineering
The author checks the cointegration between WTI oil market and the US market of stocks represented by the S&P index. As it turns out not to exist, short-term relations are investigated. The study confirms that crude oil market significantly influences the stock market in the short run, however it does not give an unambigous answer if this impact is made by oil itself or together with the GBP/USD currency rate. Furthermore, the relation does not go in another direction which means that the stock market has no impact on the oil market. The Unrestricted Vector Autoregression model is built. The author uses weekly data and the research period is from April 1990 to May 2021. The study implies that stable crude oil prices are desirable in order not to destabilize stock markets whose instability threatens the real economy. Conclusions are vital for a wide group of entities such as policy makers, authorities, institutional and individual investors, as well as other financial market participants.