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Oil Price Shocks and Stock Market Reactions: Insights from Impulse Response Functions

Tam Phan Huy （ University of Economics and Law and Vietnam National University, Ho Chi Minh City, Vietnam ）

Quan Do Anh （ University of Economics and Law, Ho Chi Minh City, Vietnam and Vietnam National University, Ho Chi Minh City, Vietnam ）

Long Pham Phuc （ University of Economics and Law, Ho Chi Minh City, Vietnam and Vietnam National University, Ho Chi Minh City, Vietnam ）

The Trinh Ngoc （ University of Economics and Law, Ho Chi Minh City, Vietnam and Vietnam National University, Ho Chi Minh City, Vietnam ）

Duc Nguyen Thanh （ University of Economics and Law, Ho Chi Minh City, Vietnam and Vietnam National University, Ho Chi Minh City, Vietnam ）

https://doi.org/10.37155/2972-4813-gep0304-1

Abstract

This research aims to analyze the impact of oil price shocks on stock market indices using the VECM. The data spans from January 1, 2000, to December 31, 2023, capturing both short-term dynamics and long-term equilibrium relationships. Key findings indicate that oil price shocks significantly influence stock market indices, with varying impacts across different regions. For instance, Japan and Vietnam exhibit stronger negative effects compared to other regions. The results also reveal differences in the speed of adjustment towards long-term equilibrium, highlighting varying levels of market efficiency. The Johansen cointegration test results reveal significant long-term equilibrium relationships between oil prices and stock market indices, underscoring the interconnected nature of these variables. The study concludes that oil prices are a critical factor in stock market performance, underscoring the need for informed strategies by investors, corporate managers, and government agencies to mitigate risks and capitalize on opportunities. These insights are crucial for understanding the interconnected nature of global financial markets and developing effective risk management strategies.

Keywords

Oil price shocks; Stock market indices; VECM

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References

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