The Link between Energy Prices and Stock Markets in European Union Countries

22 Pages Posted: 16 Oct 2024

See all articles by Robert Grecu

Robert Grecu

Bucharest University of Economic Studies

Alexandru Cramer

Bucharest University of Economic Studies

Daniel Traian Pele

Bucharest University of Economic Studies; Romanian Academy - Institute for Economic Forecasting

Stefan Lessmann

School of Business and Economics, Humboldt-University of Berlin

Abstract

The paper illustrates the connection between the energy sector and the stock market, specifically how changes in energy prices, such as oil and gas, influence the returns of the main European stock indices. The analysis was conducted at the level of European Union countries, considering both the specific situation of each state and the case of EU country groups based on different criteria, such as geographical region or industrial development. Even though EU countries share several common economic characteristics, the results of our analysis show that the impact of energy prices on the stock market can differ significantly from one state to another. Another important observation from the results is that energy price dynamics have a different impact on countries with the highest industrial production compared to the rest of the EU countries. From a quantitative perspective, the paper examines both the co-movement between variables and the impact of various shocks. Furthermore, the analysis focuses on the dynamic links between energy and stock markets, employing models such as Dynamic Conditional Correlation and Time-Varying Parameter Vector Autoregressive.

Keywords: energy market, capital market, DCC-GARCH, TVP-VAR

Suggested Citation

Grecu, Robert and Cramer, Alexandru and Pele, Daniel Traian and Lessmann, Stefan, The Link between Energy Prices and Stock Markets in European Union Countries. Available at SSRN: https://ssrn.com/abstract=4989890 or http://dx.doi.org/10.2139/ssrn.4989890

Robert Grecu

Bucharest University of Economic Studies ( email )

Tache Ionescu street, no. 11, sector 1
Bucharest
Romania

Alexandru Cramer

Bucharest University of Economic Studies ( email )

Tache Ionescu street, no. 11, sector 1
Bucharest
Romania

Daniel Traian Pele (Contact Author)

Bucharest University of Economic Studies

Piata Romana nr. 6
Bucharest
Romania

Romanian Academy - Institute for Economic Forecasting ( email )

Calea 13 Septembrie nr. 13
Bucharest, 050711
Romania

Stefan Lessmann

School of Business and Economics, Humboldt-University of Berlin ( email )

Unter den Linden 6
Berlin, Berlin 10099
Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
29
Abstract Views
119
PlumX Metrics