Received:
2019-03-15 | Accepted:
2019-06-08 | Published:
2019-06-30
Title
Impact of oil prices on stock return: evidence from G7 countries
Abstract
The aim of the study is to investigate the impact of oil prices on the stock market of G7 countries. Oil prices not only affect the economy of a country but also the country's stock market. The stock market affects the stock valuation or, to put in another way, the company's stock value. The stock value is associated with the discounted sum of predictable future cash flows and these flows may be distressed by macroeconomic variables including oil prices fluctuations. This study has researched the impact of oil prices' fluctuation on countries included G7, i.e. Canada, Germany, France, Italy, United Kingdom, United States of America and Japan. The time periods were from September 2009 to August 2016. For the analysis, the most recent data is collected. In this study, the real stock return has considered as a depended variable or predict variable, while oil prices, industrial production, and short-term interest rate are as independent, or predictor variables. The study is quantitative in nature. All data was collected from OECD website with the exception of oil prices, which were taken from oil intelligence report. The model, which has been used in the study is based on Arbitrage pricing theory-APT model, where financial assets are associated with macroeconomic variables. The results showed that Industrial production is positively associated with a real stock return in the case of Germany, Italy, Japan, the United Kingdom, and France, while the short-term interest rate is negatively connected with a real stock return in the case of Canada, the United Kingdom, and United States of America. Oil prices have an insignificant effect on real stock markets of all considered countries. The authors provide an economic interpretation of the obtained results.
Keywords
oil prices, industrial production, short-term interest rate, real stock return, G7 countries, Arbitrage Pricing Theory (APT)
JEL classifications
E31
, G12
URI
http://jssidoi.org/ird/article/10
DOI
HAL
Pages
129-137
Funding
This research was supported by Vilnius Gediminas Technical University, Department of Entrepreneurshi and Business Technologies
This is an open access issue and all published articles are licensed under a
Creative Commons Attribution 4.0 International License
Journal title
Insights into Regional Development
Volume
1
Number
2
Issue date
June 2019
Issue DOI
ISSN
ISSN 2345-0282 (online)
Publisher
VšĮ Entrepreneurship and Sustainability Center, Vilnius, Lithuania
Cited
Article views & downloads
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