Affiliations 

  • 1 Universiti Malaya, Kuala Lumpur, Malaysia
  • 2 BRAC University, Bangladesh
  • 3 Universiti Pendidikan Sultan Idris, Tanjung Malim, Malaysia
Sage Open, 2023;13(1):21582440231153855.
PMID: 36852228 DOI: 10.1177/21582440231153855

Abstract

We revisit the oil price and stock market nexus by considering the impact of major economic shocks in the post-global financial crisis (GFC) scenario. Our breakpoint unit root test and Markov switching regression (MRS) analyses using West Texas Intermediate (WTI) oil price and Standard & Poor's 500 (S&P 500) market index show that among the major economic events, the recent coronavirus (COVID-19) pandemic is the most significant contributor to market volatilities. Furthermore, our MRS results show that the relationship between oil price and the stock market is regime-dependent; the stock market experiences substantial and positive shocks in a volatile oil price regime. Our results provide valuable insights to investors and policymakers regarding risk management and financial market stability during economic crisis periods, specifically during the COVID-19 pandemic.

* Title and MeSH Headings from MEDLINE®/PubMed®, a database of the U.S. National Library of Medicine.