Oil Price and Financial Markets in the Main OPEC Countries
Keywords:Oil Prices, Stock Markets, Evolutionary Co-spectral Analysis,
This paper assesses the impact of oil prices on stock markets of the four major OPEC countries, namely Emirate Arab United, Kuwait, Saudi, Arabia and Venezuela, over the period spanning from 03/09/2000 to 03/12/2010. We aim at complementing the results from existing analyses, mainly focused on oil-importing countries, by using a novel technique, namely the evolutionary co-spectral analysis as defined by Priestley and Tong (1973). We find that co-movements between oil and stock markets can be either positive or negative. This interdependence is a medium-lived phenomenon, revealed on a three years and one quarter horizon, being weak in the short-run (ten months). Oil price shocks in periods of world turmoil or during fluctuations of the global business cycle (downturn or expansion, as for instance the 2008 financial crisis) have a significant impact on the relationship between oil and stock market prices in oil-exporting countries.
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