Portuguese stock market returns and oil price variations

Abstract

This article investigates the existence of a dynamic link between oil prices and stock market returns. A vector autoregressive model is estimated for Portugal, a small open non-producer economy. Results show that none of the three types of oil price shocks addressed – global supply shocks, global demand shocks for all industrial commodities and precautionary demand shocks – affect Portuguese stock market returns.

Keywords:

• stock returns
• oil price
• VAR model
• small open non-producer economy

JEL Classification:

• G32
• Q43

Notes

¹ On the relationship between oil price shocks and significant events in world history see Filis et al. (2011).

² The source for world oil production and oil price is the U.S. Energy Information Administration. The source for real activity of industrial commodities global markets is http://www-personal.umich.edu/~lkilian/reaupdate.txt.