FRACTIONAL COINTEGRATION RELATIONSHIP BETWEEN OIL PRICES AND STOCK MARKETS: AN EMPIRICAL ANALYSIS FROM G7 COUNTRIES


Kiran B.

PRAGUE ECONOMIC PAPERS, vol.20, pp.177-189, 2011 (Journal Indexed in SSCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 20
  • Publication Date: 2011
  • Doi Number: 10.18267/j.pep.395
  • Title of Journal : PRAGUE ECONOMIC PAPERS
  • Page Numbers: pp.177-189

Abstract

This paper examines the long-run relationship between oil prices and stock market prices of G7 countries by using Robinson (1994a) tests for fractional integration and cointegration instead of the classical approaches. Having found that the unit root null hypothesis cannot be rejected for any individual series, it is examined whether oil prices and stock market prices have a fractional cointegration relationship. Test results on the residuals from the cointegrating regressions indicate that there is evidence of fractional cointegration between oil prices and DAX 30, Dow Jones, FTSE 100 and SP-TSX indices while there is no evidence of fractional cointegration for others.