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Oil Price Shocks and the Canadian Stock Market

Author

Listed:
  • Ruiqi Tan

    (Faculty of Economics, University of Cambridge, Cambridge CB3 9DD, UK)

  • Wei Dai

    (Department of Economics, Philosophy and Political Science, University of British Columbia Okanagan, Kelowna, BC V1V 1V7, Canada)

Abstract

In this paper, we use monthly data from 1992 to 2022 and a structural VAR model to investigate the effects of oil supply shocks, aggregate demand shocks, and oil-specific demand shocks in the global crude oil market on the Canadian stock market. Our analysis reveals that these shocks affect the S&P/TSX Composite Index and various sector-specific indices in different ways. Specifically, the response of the Canadian market to oil-specific demand shocks diverges notably from the U.S. market, highlighting Canada’s unique position as an oil-exporting country. In the long run, oil price shocks account for over 10% of the variation in the composite index and as much as 35% in the Energy sector index.

Suggested Citation

  • Ruiqi Tan & Wei Dai, 2024. "Oil Price Shocks and the Canadian Stock Market," JRFM, MDPI, vol. 17(11), pages 1-14, November.
    • Handle: RePEc:gam:jjrfmx:v:17:y:2024:i:11:p:518-:d:1523173
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    References listed on IDEAS

    as
    1. Abhay Abhyankar, Bing Xu, and Jiayue Wang, 2013. "Oil Price Shocks and the Stock Market: Evidence from Japan," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    2. Abhay Abhyankar & Bing Xu & Jiayue Wang, 2013. "Oil Price Shocks and the Stock Market: Evidence from Japan," The Energy Journal, , vol. 34(2), pages 199-222, April.
    3. Goncalves, Silvia & Kilian, Lutz, 2004. "Bootstrapping autoregressions with conditional heteroskedasticity of unknown form," Journal of Econometrics, Elsevier, vol. 123(1), pages 89-120, November.
    4. Apergis, Nicholas & Miller, Stephen M., 2009. "Do structural oil-market shocks affect stock prices?," Energy Economics, Elsevier, vol. 31(4), pages 569-575, July.
    5. Stavros Degiannakis, George Filis, and Vipin Arora, 2018. "Oil Prices and Stock Markets: A Review of the Theory and Empirical Evidence," The Energy Journal, International Association for Energy Economics, vol. 0(Number 5).
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