The impact of oil price on stock markets: Evidence from developed markets

ABSTRACT: This thesis empirically investigates the impact of oil price on the stock markets of UK, Canada, USA, and France in the term of real stock returns. In order to do this study some other factors like industrial production and real interest rate are added to the study. Data used in this study is based on monthly time series from1990:01 to 2012:12. Different approach like unit root test and Co-integration Analysis and Level Coefficients and Error Correction Model Estimation were implied to the study. The first aim of the study was to understand the behavior of oil producing and oil consuming countries. According to the test the response of Canada as oil producer to the increase of oil price was positive and the impact was shown in the first month. The rest countries which were oil consumer respond to this change negatively. Key Words: Oil price, Stock market, Error Correction Model Estimation. …………………………………………………………………………………………………………………………………………………………………………………………………………