The Impact of Oil Price Shocks on the U.S. Stock Market

21 Pages Posted: 28 Oct 2009

See all articles by Lutz Kilian

Lutz Kilian

University of Michigan at Ann Arbor - Department of Economics; Centre for Economic Policy Research (CEPR)

Cheolbeom Park

Korea University

Multiple version iconThere are 2 versions of this paper

Date Written: 2008-07

Abstract

It is shown that the reaction of U.S. real stock returns to an oil price shock differs greatly depending on whether the change in the price of oil is driven by demand or supply shocks in the oil market. The demand and supply shocks driving the global crude oil market jointly account for 22% of the long-run variation in U.S. real stock returns. The responses of industry-specific U.S. stock returns to demand and supply shocks in the crude oil market are consistent with accounts of the transmission of oil price shocks that emphasize the reduction in domestic final demand.

Suggested Citation

Kilian, Lutz and Park, Cheolbeom, The Impact of Oil Price Shocks on the U.S. Stock Market (2008-07). International Economic Review, Vol. 50, Issue 4, pp. 1267-1287, November 2009. Available at SSRN: https://ssrn.com/abstract=1495276 or http://dx.doi.org/10.1111/j.1468-2354.2009.00568.x

Lutz Kilian (Contact Author)

University of Michigan at Ann Arbor - Department of Economics ( email )

611 Tappan Street
Ann Arbor, MI 48109-1220
United States
734-764-2320 (Phone)
734-764-2769 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Cheolbeom Park

Korea University ( email )

1 Anam-dong 5 ka
Seoul, 136-701
Korea, Republic of (South Korea)

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