IAEE Members and subscribers to The Energy Journal: Please log in to access the full text article or receive discounted pricing for this article.

Oil Price Shocks and the Stock Market: Evidence from Japan

We study, using a structural vector autoregressive (SVAR) model, the relationship between oil price shocks and the Japanese stock market. We find that oil price shocks that arise from changes in aggregate global demand are positively correlated to returns on the Japanese stock market. Thus, in contrast to the conventional wisdom, a rise in oil price is not always bad news for the Japanese stock market. On the other hand, the Japanese stock market reacts negatively to oil price increases related to oil-market specific demand shocks. Finally, different from prior research using U.S. stock market data, we find that supply and demand shocks in the global crude oil market affect returns to the Japanese stock market index through changes to expected real cash flows rather than to changes to expected returns.

Purchase ( $25 )

Energy Specializations: Petroleum – Markets and Prices for Crude Oil and Products; Petroleum – Policy and Regulation; Energy Modeling – Energy Data, Modeling, and Policy Analysis; Energy and the Economy – Energy as a Productive Input; Energy and the Economy –Economic Growth and Energy Demand; Energy and the Economy – Resource Endowments and Economic Performance; Energy and the Economy – Energy Shocks and Business Cycles

JEL Codes: Q41: Energy: Demand and Supply; Prices, Q43: Energy and the Macroeconomy, G12: Asset Pricing; Trading Volume; Bond Interest Rates, Q35: Hydrocarbon Resources, Q31: Nonrenewable Resources and Conservation: Demand and Supply; Prices

Keywords: Oil price shocks, Japan, Stock market, Japanese Crude Cocktail, Structural VAR

DOI: 10.5547/01956574.34.2.7

References: Reference information is available for this article. Join IAEE, log in, or purchase the article to view reference data.

Published in Volume 34, Number 2 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.


© 2023 International Association for Energy Economics | Privacy Policy | Return Policy