Relationship between Crude Oil Prices and Stock Market: Evidence from India

Authors

  • Ankit Sharma Accendere Knowledge Management Private Limited
  • Sasmita Giri IFIM Business School, Bangalore
  • Harsh Vardhan IFIM Business School, Bangalore
  • Sujeet Surange IFIM Business School, Bangalore
  • Rohan Shetty IFIM Business School, Bangalore
  • Vishwaroop Shetty IFIM Business School, Bangalore

Abstract

This paper estimates the linear interdependencies between international crude oil prices and stock market indices of India using weekly data spanning from Jan 2010 to Jan 2017 in a Vector Autoregressive framework. The time series used for the analysis are crude oil futures prices, Nifty Index, and BSE Energy Index. ADF and PP unit root tests reveal that all the time series are non-stationary at level and stationary at first difference. Cointegration test reveals the absence of cointegrating factor i.e. absence of long run relationship. VAR model captures all the time series as endogenous variables and independent variables are studied at two lags. Result shows that the Energy Index is very well explained by the lagged values of Crude oil futures prices, Nifty Index, and BSE Energy Index. Impulse response function reveals that crude oil prices are affected negatively when one standard deviation shocks are given to stock indices.

Keywords: Crude oil, BSE Energy Index, Nifty, Vector Autoregression

JEL Classifications: Q42, Q43

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Published

2018-07-16

How to Cite

Sharma, A., Giri, S., Vardhan, H., Surange, S., Shetty, R., & Shetty, V. (2018). Relationship between Crude Oil Prices and Stock Market: Evidence from India. International Journal of Energy Economics and Policy, 8(4), 331–337. Retrieved from https://www.econjournals.com/index.php/ijeep/article/view/4439

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