STOCK PRICE AND ENERGY PRICE: A DISAGGREGATE ANALYSIS
Keywords:
Asset returns, Financial market, Oil price, Symmetric test, Asymmetric test, Augmented CAPM ModelAbstract
This paper investigates the impact of oil price on the stock returns of eight economic sectors namely; Construction (CON), Consumer (CSU), Finance (FIN), Industrial (IND), Plantation (PLN), Property (PRP), Services (SER), and Mining (MIN). By employing the Augmented Capital Asset Pricing Model (A-CAPM), two tests were conducted. The first tests on symmetric relationship while the second detects the presence of an asymmetric relationship. The estimated results from Test 1 documented insignificant results in all sector analyses. These findings signified that the stock returns were not exposed to oil price shocks. The estimated results of Test 2 indicated the presence of one significant result in industrial (IND) analysis. In particular, the returns of the IND sector were negatively exposed to change in oil price, and it was more significant during periods of oil price increased. In other word, the event of oil
price increased significantly reduced the returns of the IND sector.
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References
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Agusman, A., & Derianto, E. (2008, August). Oil price and industry stock returns: Evidence from Indonesia. Paper presented at the 21st Australasian Finance and Banking Conference, Sydney, Australia.
Basher, S. A., & Sadorsky, P. (2006). Oil price risk and emerging stock markets. Global Finance Journal, 17(2), 224-251.
BNM Annual Report. (Various issues). Kuala Lumpur, Malaysia.
Burbidge, J., & Harrison, A. (1984). Testing for the effects of oil price rises using vector autoregressions. International Economics Review, 25, 459-84.
Chen, N. F., Roll, R., & Ross, S. A. (1986). Economic forces and the stock market. Journal of Business, 59, 383-403.
Cobo-Reyes, R., & Quiros, G. P. (2005). The effect of oil price on industrial production and on stock returns. Retrieved July 20, 2004. http://econpapers.repec.org/paper/grawpaper/05_2F18.htm
Cunado, J., & de Gracia, F. P. (2004). Oil prices, economic activity and inflation: Evidence for some Asian countries. Quarterly Review of Economics and Finance, 45(1), 65-83.
Economic Report (Various issues). Ministry of Finance, Malaysia.
EPU Report (Various Issues). Malaysia Prime Minister’s Office, Putrajaya.
Hamao, Y. (1989). An empirical examination of the arbitrage pricing theory: Using Japanese data. Japan and the World Economy, 1, 45−61.
Hammoudeh, S., & Eleisa, E. (2004). Dynamic relationships among GCC stock markets and NYMEX oil futures. Contemporary Economic Policy, 22 (2), 250-269.
Hondroyiannis, G., & Papapetrou, E. (2001). Macroeconomic influences on the stock market. Journal of Economic and Finance, 25(1), 33-49
Huang, R. D., Masulis, R.W., & Stoll, H. R. (1996). Energy shocks and financial markets. Journal of Futures Markets, 16(1), 1-27.
Ibrahim, H. M. (2006). The exchange rate exposure of sectoral stock returns: Evidence from Malaysia. International Journal of Economics and Management 2(2), 207-219.
Jones, C. M., & Kaul, G. (1996). Oil and stock markets. Journal of Finance, 51(2), 463-491.
Jorion, P. (1990). The exchange rate exposure of US multinationals. Journal of Business, 63, 331-345.
Kaneko, T., & Lee, B. S. (1995). Relative importance of economic factors in the U.S. and Japanese stock markets. Journal of the Japanese and International Economies, 9, 290−307.
Kaul, G., & Seyhun, H.N. 1990. Relative price variability, real shocks, and the stock market. Journal of Finance, 45, 479-496.
Manning, N. (1991). The UK oil industry: some inferences from the efficient market Hypothesis. Scottish Journal of Political Economy, 38, 324-334.
Maghreyeh, A. (2004). Oil price shocks and emerging markets: A generalized VAR approach. International Journal of Applied Econometrics and Quantitative Studies, 1(2), 27-40.
Mork, K. A., Olsen, O., & Mysen, H. (1994). Macroeconomic responses to oil price increases and decreases in seven OECD countries. Energy Journal, 15, 19-35.
Nandha, M., & Hammoudeh, S. (2007). Systematic risk, and oil price and exchange rate sensitivities in Asia-Pacific stock markets. Research in International Business and Finance, 21(2), 326-341.
NEAC Report (2005). Retrieved April 14, 2006. www.neac.jpm.my
Norasibah, A. J. (2009a). Oil Prices and the Malaysian Economy. International Review of Business Research Papers, Vol. 5 No. 4, June 2009. Pp. 232-256
Norasibah, A. J. (2009b). Stock Price Movements: Does Change in Energy Price Matter? – Proceeding at the 4th Asian Academy of Applied Business Conference, Manila, Philipphine. Dis. 2009
Papapetrou, E. (2001). Oil price shocks, stock market, economic activity and employment in Greece. Energy Economics, 23, 511-532.
Sadorsky, P. (2003). The Macroeconomic determinants of technology stock price volatility. Review of Financial Economics, 12, 191-205.
Sadorsky, P. (1999). Oil price shocks and stock market activity. Energy Economics, 21, 449-469.
Tai, C. S. (2005). Asymmetric currency exposure of US bank and stock Returns. Journal of Multinational Financial Management, 15, 455 -472.
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Published
2019-03-05
How to Cite
Abdul Jalil, N., Hamidah, Y., & Ismail, R. (2019). STOCK PRICE AND ENERGY PRICE: A DISAGGREGATE ANALYSIS. Journal of Contemporary Issues and Thought, 2, 129–140. Retrieved from https://ejournal.upsi.edu.my/index.php/JCIT/article/view/939
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