Oil price and stock market index co-integration analysis in East Asia and Pacific countries

ABSTRACT: The aim of this study is to analyze the effects of oil prices on selected East Asian Pacific countries stock market indices: Australia, Japan, Hong Kong, Singapore and New Zealand for the period of 1997-2011. These countries have been selected mainly because little research has been done about these countries and these are the fastest and most prosperous countries for future investing. A linear and logarithmic regression analysis is used to carry out the empirical investigation based on the co-integration of the Brent oil prices and the stock market indices. ARDL approach is used to check the unit root test, the bound test, Conditional Error Correction model, the long term growth model. In addition, this study also examines Impulse Response and Variance Decomposition of the oil price and market indices. Results revealed that Hong Kong, Singapore and Japan ex pacific are integrating to oil price changes. Key Words: Oil price, Stock market indices, ARDL approach. …………………………………………………………………………………………………………………………