Assessing Dynamic Relationships Between Oil Price, Macroeconomy and Stock Market Returns in the U.S, Canada and China: A Short-run SVAR Approach Restricted; Files Only

Zhao, Tianchen (Spring 2019)

Permanent URL: https://etd.library.emory.edu/concern/etds/gx41mj718?locale=en
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Abstract

Using structural VAR models (SVAR) with contemporaneous restrictions on the U.S., Canada

and China, I empirically examine and compare how oil price, macroeconomy and stock returns

interact across three countries. I find that first of all, a negative oil price shock has no significant

impact on stock market returns. It is contractionary only in the U.S. and raises the Federal Funds

Rate. Secondly, whether a “countercyclical policy” is present in each country depends on the

source of increase in the output level. Also, a rising interest rate only lowers stock returns in the

U.S. and Canada, and the “price puzzle” is found in the U.S. and China. Lastly, a bidirectional

positive relationship between the production level and real equity returns is discovered in the

U.S. and Canada, whereas in China, stock market movements positively contribute to the

production level fluctuations, but not vice versa.

Table of Contents

Table of Contents

Section 1: Introduction……………………………………………………………...........1

Section 2: Literature Review………………………………………………………..........3

Section 3: Short-run Structural Vector Autoregression (SVAR) Model…………7

Section 4: Data, Methodology and SVAR model specification…………………..10

Section 5: Estimation Results and Interpretations………………………………...13

Section 6: Limitations and Potential Improvements……………………………... 21

Section 7: Conclusion……………………………………………………………............24

References…………………………………………………………………………..............25

Appendix…………………………………………………………………………................30

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