Striking Oil: Another Puzzle

We find that changes in oil prices strongly predict future stock market returns in many countries in the world. In our thirty year sample of monthly data for developed stock markets, we find statistically significant predictability in 12 out of the 18 countries and in a world market index. For our shorter time series of emerging markets we obtain similar results. We show that these results are economically significant and robust with respect to the sample period, different kind of oil prices we consider and well known effects like the January effect and the Halloween effect

Screening Genes for Association with Loci for Nitrogen-Use Efficiency in Perennial Ryegrass by Pyrosequencing\u3csup\u3eTM\u3c/sup\u3e

The application of marker-assisted selection to improve quantitative traits in perennial ryegrass (Lolium perenne) is cumbersome. It requires a priori knowledge on the association of markers and genes. The knowledge on the chromosomal location of major genes for quantitative traits as well as on gene sequences is rapidly growing. However, determination of the genetic constitution of parents prior to their use in breeding still is impractical. More realistic is to collect association data along with the testing activities needed for breeding new varieties. This study uses changes in allele frequency due to selection as a criterion for gene-trait association. Selection-dependent changes are detected with single nucleotide polymorphisms (SNPs) of candidate genes using DNA-pools of F2 plants differing in nitrogen-use efficiency (NUE). The procedure and its feasibility are outlined for one locus

Oil prices and stock returns : nonlinear links across sectors

We present evidence of an asymmetric relationship between oil prices and stock returns. The two regime multivariate Markov switching vector autoregressive (MSVAR) model allow us to capture the state shifts in the relationship between regional stock markets and sectors. Results suggest that oil price risk is significantly priced in the sample used. The impact is asymmetric with respect to market phases, and regimes have been associated with world economic, social and political events. Our study also suggests asymmetric responses of sector stock returns to oil price changes and different transmission impacts depending on the sector analyzed. There is a high causality from oil to sectors like Industrials and Oil & Gas. Companies inside the Utilities sector were more able to hedge against oil price increases between 2007 and 2012. Historical crisis events between 1992–1998 and 2003–2007 do not seem to have affected the relationship between oil and sector stock returns, given the higher probability of remaining smoother. For all sectors there seems to be a turn back to stability from 2012 onwards. Finally, investors gain more through portfolio diversification benefits built across, rather than within sectors.info:eu-repo/semantics/publishedVersio

Oil price shocks and volatility in Australian stock returns

This paper examines the effect of oil shocks on return and volatility in the sectors of Australian stock market and finds significant effects for most sectors. For the overall market index, an increase in oil price return significantly reduces return, and an increase in oil price return volatility significantly reduces volatility. An advantage of looking at sector returns rather than a general index of stock returns is that sectors may well differ markedly in how they respond to oil price shocks. The energy and material sectors (as expected) and the financial sector (surprisingly) are out of step (in different ways) with results for the other sectors and for the overall index. A rise in oil price increases returns in the energy and material sectors and an increase in oil price return volatility reduces stock return volatility in the financial sector. Explanation for the negative (positive) association between oil return (oil return volatility) and returns (volatility of returns) in the financial sector must be based on the association via lending to and/or holdings of corporate bonds issued by firms with significant exposure to oil price fluctuations and their speculative positions in oil related instruments

The directional volatility connectedness between crude oil and equity markets: New evidence from implied volatility indexes

In this paper, we use a set of newly introduced implied volatility indexes to investigate the directional connectedness between oil and equities in eleven major stock exchanges around the globe from 2008 to 2015. The inference on the oil–equity implied volatility relationships depends on Diebold and Yilmaz (2012, 2014, 2015) who proposed a set of directional measures that enable the dynamic and directional characterization of the relationships among financial variables. We find uniform results across the sample countries indicating that the connectedness between oil and equity is established by the bi-directional information spillovers between the two markets. However, we find that the bulk of association is largely dominated by the transmissions from the oil market to equity markets and not the other way around. The pattern of transmissions is varying over the sample period; however most of the linkages between oil and equities are established from the mid of 2009 to the mid of 2012 which is a period that witnessed the start of global recovery

Volatility spillovers and cross-hedging between gold, oil and equities: Evidence from the Gulf Cooperation Council countries

The paper examines the return and volatility spillovers between crude oil, gold and equities, and investigates the usefulness of the two commodities in hedging equity portfolios. Using daily data from January 20043 to May 2016 for the Gulf Cooperation Council countries, a DCC-GARCH model is used to estimate dynamic correlations and hedge ratios. We find significant spillovers from oil to equities, highlighting the heavy dependence of the local economies on oil. Moreover, the spillovers of gold on the stock markets are insignificant, suggesting that gold price fluctuations do not necessarily influence equity investment decisions. In the opposite direction, we find that equities do not exert significant influence on the two commodities, which we attribute to the relatively small capitalisation of the exchanges. Our results reveal low dynamic correlations and hedge ratios, with a few spikes during crises, indicating that oil and gold are cheap hedges for stocks, albeit not good ones, while they could be considered as weak safe havens, but at a considerable cost

Oil and stock returns: Evidence from European industrial sector indices in a time-varying environment

The time-varying correlation between oil prices returns and European industrial sector indices returns, considering the origin of the oil price shock, is investigated. A time-varying multivariate heteroskedastic framework is employed to test the above hypothesis based on data from 10 European sectors. The contemporaneous correlations suggest that the relationship between sector indices and oil prices change over time and they are industry specific. In addition, the supply-side oil price shocks result in low to moderate positive correlation levels, the precautionary demand oil price shocks lead to almost zero correlation levels, whereas the aggregate demand oil price shocks generate significant changes in the correlation levels (either positive or negative). Both the origin of the oil price shock and the type of industry are important determinants of the correlation level between industrial sectors’ returns and oil prices. Prominent among the results is the fact that during the financial crisis of 2008 some sectors were providing diversification opportunities to investors dealing with the crude oil market

Time-varying correlation between oil and stock market volatilities: Evidence from oil-importing and oil-exporting countries

This paper investigates the time-varying conditional correlation between oil price and stock market volatility for six major oil-importing and oil-exporting countries. The period of the study runs from January 2000 until December 2014 and a Diag-BEKK model is employed. Our findings report the following regularities. (i) The correlation between the oil and stock market volatilities changes over time fluctuating at both positive and negative values. (ii). Heterogeneous patterns in the time-varying correlations are evident between the oil-importing and oil-exporting countries. (iii) Correlations are responsive to major economic and geopolitical events, such as the early-2000 recession, the 9/11 terrorist attacks and the global financial crisis of 2007-2009. These findings are important for risk management practices, derivative pricing and portfolio rebalancing

Financial and monetary policy responses to oil price shocks: evidence from oil-importing and oil-exporting countries

In this study, we investigate the financial and monetary policy responses to oil price shocks using a Structural VAR framework. We distinguish between net oil-importing and net oil-exporting countries. Since the 80s, a significant number of empirical studies have been published investigating the effect of oil prices on macroeconomic and financial variables. Most of these studies though, do not make a distinction between oil-importing and oil-exporting economies. Overall, our results indicate that the level of inflation in both net oil-exporting and net oil-importing countries is significantly affected by oil price innovations. Furthermore, we find that the response of interest rates to an oil price shock depends heavily on the monetary policy regime of each country. Finally, stock markets operating in net oil-importing countries exhibit a negative response to increased oil prices. The reverse is true for the stock market of the net oil-exporting countries. We find evidence that the magnitude of stock market responses to oil price shocks is higher for the newly established and/or less liquid stock market