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Table 4 Selected Empirical Studies

From: The time-varying effects of oil prices on oil–gas stock returns of the fragile five countries

Authors Variables Country and sample period Methodology Results
Jones and Kaul (1996) Real rate of return on common stock, industrial production, producer price indices for oil, dividend yield, default spread, term spread, shocks to the default spread, shock to the term spread US (1947–1991), Canada (1960–1991), Japan (1970–1991), United Kingdom (1962–1991) Granger causality The reaction of the US and Canadian stock prices to oil shocks can be explained through the current and expected future cash flows, but the same is not possible for U.K. and Japanese stock markets. Thus, it is concluded that it is difficult to predict a rational model where oil shocks changed the expected returns
Huang et al. (1996) Crude oil futures, heating oil futures, treasury bill, S&P 500 index, return of the 12-industry price index, 3 individual oil company stock prices US—sectoral level (daily data—9th October 1979 for heating oil; 11th April 1983 for crude oil to 16th March 1990) VAR model No significant correlation is observed between oil futures and stock returns, except for oil corporations
Park and Ratti (2008) Stock prices, short-term interest rates, consumer prices, industrial production, world oil price and a national real oil price for each country US and 13 European countries (1986M1–2005M12) VAR model Real world oil price shocks have a statistically significant impact on real stock returns across all countries. The contribution of oil price shocks to variability in real stock returns is greater than that of the interest rate for most of the countries including the US Although there is some evidence of asymmetric effects of (negative and positive) oil price shocks on real stock returns for the US and for Norway (oil exporter), little evidence is found for oil importing European countries
Ciner (2001) Closing prices of oil futures contracts traded on NY Mercantile Exchange and S&P 500 stock index US (daily data—for 1980s: 9th October 1979 for heating oil futures, 11th April 1983 for crude oil futures through 16th March 1990. For 1990′s: 20th March 1990 through 2nd March 2000) Nonlinear Granger Causality Oil price shocks affect the stock index returns in a nonlinear fashion while the stock index returns also affect oil futures markets, suggesting a feedback relation
Nandha and Faff (2008) Total return of 35 global industry indices, world market return, oil price Global (sectoral level—1983M4–2005M9) Regression/standard market model augmented by the oil price factor Oil price shocks have a negative impact on equity returns from all industries; except for the mining, oil and gas industries
McSweeney and Worthington (2008) Market portfolio, oil prices, exchange rates, term premium and industry returns (banking, diversified financials, energy, insurance, media, property trusts, materials, retailing and transportation) Australia (sectoral level, 1979M12–2006M09) Multi-factor static and dynamic models A strong positive correlation is reported between energy industry return and oil price increase while the banking, retail and transportation industries were negatively affected by oil price shocks. Exchange rate is also found to be an important factor for the banking and finance stock returns
Gogineni (2010) Returns on short-term treasuries, term premiums, default premiums and return on the trade-weighted foreign exchange value of the US dollar US (Sectoral level for 61 industries, daily data 1998M1–2006M12) Quantile regression Oil price changes significantly affects stock returns based on the dependence of the industry on oil. In addition, industries' demand-side or the cost-side dependence matters for industries' sensitivity to oil price shocks
Arouri and Nguyen (2010) The Dow Jones (DJ) Stoxx 600 and twelve European sector indices, brent oil prices (€) 12 European countries (sectoral level, weekly data 01/01/1998 to 13/11/2008) Multi-factor asset pricing model, Granger Causality test A strong and significant correlation between oil price changes and stock exchanges is reported for most European countries. However, the structure and sensitivity of stock returns to oil price shocks varies significantly across the industries
Moya-Martínez et al. (2014) Value-weighted industry stock indices for 14 industries, oil price, the yield on 10-year Spanish Treasury bonds, Indice General de la Bolsa de Madrid (the broadest Spanish market index) Spain (sectoral level, 1993M1–2010M12) Multi-factor model with multiple structural changes The impact of oil price changes on the Spanish stock market is quite modest and oil price shocks have a stronger impact on industries with higher degree of oil price exposure (Energy, Construction, Basic Resources, Food and Beverages, Banking) Also, it's reported that the oil price sensitivity of Spanish stock market has increased in 2000′s when compared to 1990′s
Sadorsky (2001) Monthly excess equity returns on the oil and gas stock index, monthly excess return on the market index, monthly return to oil prices, interest rate (term premium), exchange rate Canada's oil and natural gas industry (1983M4–1999M4) Multi-factor model The increases in market and oil price increased Canadian oil and natural gas stock prices while the increase in exchange rates or term spread reduced Canadian oil and natural gas stock prices
Ramos and Veiga (2011) Monthly excess returns of the oil and gas industry indices, one of 19 super sector indices, the world and the country market return, currency variations against the US dollar, oil price returns, volatility of oil price, difference between the local interest rate and the US interest rate. A set of industries whose activity is largely dependent on a commodity is analyzed (excess returns of Basic Resources, Food and Beverage, Chemicals and Utilities), as in the oil and gas industry 34 countries (Sectoral level, 1998M5–2009M12) International factor models Panel Estimation Oil price has a significant effect on oil and gas industry returns in both developed and emerging markets. Besides, asymmetric effects of oil price changes on oil industry returns are observed and these effects are more important in developed markets compared to emerging markets
El-Sharif et al. (2005) Return of oil and gas sector index in UK, 1 and 3-month UK treasury bills, London Brent Crude Oil Index spot barrel prices, market portfolio excess return, oil and gas industry beta and market beta, exchange rate United Kingdom's oil and natural gas industry (daily data, 1/1/1989–30/6/2001) Multi-factor model The increase in oil prices or the stock market in general increased the oil and natural gas stock returns, while the increase in the exchange rates decreased these returns
Sanusi and Ahmad (2016) The Brent crude oil price, oil and gas sector index, the stock market index United Kingdom's oil and natural gas industry (sectoral level, 2/1/2004–31/12/2015) Multi factor asset pricing model Oil price shocks have a significant effect on the oil and gas companies’ stock returns. Besides, the evidence on the asymmetric effects suggests that the effect of oil price increases is more significant than oil price decreases