Impact of Oil Price Fluctuations on Financial Markets since 2014
This paper investigates the causal impact of oil price fluctuations on financial markets since January 2014. Following a heteroscedasticity-based event study approach, the paper instruments changes in oil prices by exogenous shocks in oil supply. I...
| Main Authors: | , , |
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| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2017
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/357321485790398488/Impact-of-oil-price-fluctuations-on-financial-markets-since-2014 http://hdl.handle.net/10986/25994 |
| Summary: | This paper investigates the causal
impact of oil price fluctuations on financial markets since
January 2014. Following a heteroscedasticity-based event
study approach, the paper instruments changes in oil prices
by exogenous shocks in oil supply. It finds that oil price
declines raise uncertainty and hurt risky assets (U.S.
stocks and high-yield corporate bonds) while lifting safe
assets (U.S. investment-grade bonds and long-term Treasury
bonds). In addition, lower oil prices boost the U.S. dollar
and reduce the prices of emerging market equities.
Remarkably, the declines in oil prices hurt several sectors
that supposedly benefit from lower oil prices, such as basic
materials, industrials, and transportation. |
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