Sridhar Gogineni in his article The Stock Market Reaction to Oil Price Changes analyzed the stock market’s reaction to oil price changes. Considering the level of interest in oil prices and their supposed impact on the stock market, While the stock market is sensitive to oil price changes, financial media seems to over play the supposed impact of oil prices. Oil price changes most likely caused due to supply shifts, i.e., large price changes over a one-day horizon and price changes during the periods when the US is involved in an armed conflict in the Middle East have a large negative impact on the same day market returns. On the other hand, oil price changes most likely caused by changes in expectations of future economic activity, i.e., small oil price changes over a one-day horizon are positively correlated with the market returns. It is found no evidence of over- or under-reaction of the market to oil price
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Caban (2008) in his article Impact of Oil Prices on the Stock Market examined that impact of oil prices on the stock market is inversely proportional. A shoot in oil prices leads to a nose dive in the stock market. And a decrease in oil price on an average leads to a higher stock market return. So, the effect of oil prices becomes predictable in the stock market. The effect is profound when the oil prices increase in the magnitude of 50% to 100% annually. The reasons being:
1. Any movement in the oil prices results in uncertainty in the stock market.
2. Higher the oil prices, higher the transportation, production and heating costs.
Say, a decrease in the oil prices by 10% in US will result in the expected return to double up on the stock market in the following month. The waves of the impact on the world market index will make its presence felt significantly. Though the stock market moves in the opposite direction with respect to oil prices, it is basically a one way traffic. The stock market returns has no impact on the crude oil
Caban (2008) in his article Impact of Oil Prices on the Stock Market examined that impact of oil prices on the stock market is inversely proportional. A shoot in oil prices leads to a nose dive in the stock market. And a decrease in oil price on an average leads to a higher stock market return. So, the effect of oil prices becomes predictable in the stock market. The effect is profound when the oil prices increase in the magnitude of 50% to 100% annually. The reasons being:
1. Any movement in the oil prices results in uncertainty in the stock market.
2. Higher the oil prices, higher the transportation, production and heating costs.
Say, a decrease in the oil prices by 10% in US will result in the expected return to double up on the stock market in the following month. The waves of the impact on the world market index will make its presence felt significantly. Though the stock market moves in the opposite direction with respect to oil prices, it is basically a one way traffic. The stock market returns has no impact on the crude oil