Oil Prices and Stock Markets: A Review of the Theory and Empirical Evidence

May combine two claims.

The oil-stock market relationship does not exhibit a stable pattern over time; there are periods of coupling and decoupling between the two markets.

“For all its fanfare, the oil/stock market relationship does not necessarily exhibit a stable pattern over time. Figure 1 shows there are periods of coupling and decoupling between the two markets.”

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Causal effects between oil and stock markets depend heavily on whether research uses aggregate stock market indices, sectoral indices, or firm-level data and whether stock markets operate in net oil-importing or net oil-exporting countries.

“Our review finds that the causal effects between oil and stock markets depend heavily on whether research is performed using aggregate stock market indices, sectoral indices, or firm-level data and whether stock markets operate in net oil-importing or net oil-exporting countries.”

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The majority of papers surveyed study the impacts of oil markets on stock markets, while little research examines the reverse direction.

“The majority of papers we survey study the impacts of oil markets on stock markets, whereas, little research in the reverse direction exists.”

Probably not a substantial claim: may not pass S3 (load-bearing).

The literature has not extensively focused on the effects of oil price changes on firm-level stock returns.

“Interestingly enough, the literature has not extensively focused on the effects of oil price changes on firm-level stock returns, which would allow for an even more in-depth analysis, given that firms within the same sector may well exhibit heterogeneous responses to oil price changes.”

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There are periods when oil and stock markets exhibit a positive relationship, whereas in other periods a negative relationship prevails.

“Thus, there are periods when the two markets exhibit a positive relationship, whereas in other periods a negative relationship prevails.”

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The relationship between oil prices and stock market is time-varying and mainly driven by economic or geopolitical developments.

“These studies corroborate that the relationship between oil prices and stock market is time-varying and mainly driven by economic or geopolitical developments.”

Classified as probably not a substantial claim. May combine two claims.

The relationship between oil and stock markets may not be stable over time; a time-varying relationship may prevail.

“A recent strand in this line of research acknowledges the fact that the relationship between oil and stock markets may not be stable over time. On the contrary, a time-varying relationship may prevail.”

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There are authors who maintain that oil price changes do not impact stock returns.

“On the other hand, there are authors who maintain that oil price changes do not impact stock returns (see, inter alia , Al Janabi et al ., 2010; Jammazi and Aloui, 2010; Apergis and Miller, 2009; Cong et al ., 2008; Henriques and Sadorsky, 2008).”

• cites Al Janabi et al., 2010Not checked yet

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• cites Jammazi and Aloui, 2010Not checked yet

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• cites Apergis and Miller, 2009Not checked yet

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The US stock market responds heterogeneously to positive and negative oil price changes, but such evidence is not apparent for European stock markets.

“Park and Ratti (2008) uses all three asymmetric specifications and conclude that while the US stock market responds heterogeneously to positive and negative oil price changes, such evidence is not apparent for European stock markets.”

• cites Park and Ratti (2008)Not checked yet

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Summarizing industrial sector evidence, oil-related and oil-substitute sectors are positively affected by oil price changes, whereas oil-user and non-oil-related (or financial) sectors are negatively affected.

“Summarizing the evidence from the industrial sectors, we maintain that oilrelated and oil-substitute sectors are positively affected by changes in oil prices, whereas the reverse holds for oil-user and non-oil-related (or financial) sectors.”

Probably not a substantial claim: may not pass S3 (load-bearing). May combine two claims.

Sectors such as Supply, Manufacturing, Food, Chemical, Medical, Computer, Transportation, Real Estate and General Services respond negatively to positive oil price changes, while findings are inconclusive for Electricity, Engineering and Financial sectors.

“By contrast, authors such as Narayan and Sharma (2011) find evidence that sectors such as Supply, Manufacturing, Food, Chemical, Medical, Computer, Transportation, Real Estate and General Services respond negatively to positive oil price changes, whereas inconclusive findings are reported for the Electricity, Engineering and Financial sectors.”

• cites Narayan and Sharma (2011)Not checked yet

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The effects of oil prices on stock returns changed as a result of the Global Financial Crisis of 2007-09: before the GFC, oil prices negatively influenced firms' stock returns; since the GFC, the effects have become positive.

“More specifically, Tsai (2015) finds that before the GFC, oil prices were negatively influencing firms' stock returns. However, since the GFC the effects have become positive.”

• cites Tsai (2015)Not checked yet

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Probably not a substantial claim: may not pass S3 (load-bearing). May combine two claims.

Increased oil price changes lead to appreciation of oil producer stock prices, whereas the reverse holds for oil consumers.

“They conclude that increased oil price changes lead to appreciation of oil producer stock prices, whereas the reverse holds true for oil consumers.”

• cites Phan et al. (2015)Not checked yet

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There is an asymmetric effect of oil prices, given that some markets exhibit greater responses to positive changes in oil prices.

“Their findings suggest that there is indeed an asymmetric effect of oil prices, given that some markets exhibit greater responses to positive changes in oil prices”

• cites Broadstock et al. (2014)Not checked yet

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Studies that investigate the time-varying relationship between oil and stock markets use monthly data and employ multivariate GARCH models, such as DCC or BEKK.

“On the other hand, studies that investigate the time-varying relationship between oil and stock markets (either for aggregate stock market or sectoral indices) use monthly data and employ multivariate GARCH models, such as the Dynamic Conditional Correlation by Engle (2002) or the BEKK model of Baba et al . (1991) and Engle and Kroner (1995).”

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Authors who consider firm-level data primarily use daily data; the most common approaches are CAPM or the Fama and French (1993) 3-factor model augmented to incorporate oil price changes.

“By contrast, authors who consider firm-level data primarily use daily data. In these studies the most common approaches are the Capital Asset Pricing Model (CAPM) or the Fama and French (1993) 3-factor model, which are augmented to incorporate oil price changes”

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The literature points to the fact that stock market responses are heterogeneous to the different oil shocks, and also country-specific, depending on whether the country is an oil-importer or oil-exporter.

“Overall, we observe that the literature (although scarce) points to the fact that stock market responses are heterogeneous to the different oil shocks, and also country-specific, depending on whether the country is an oil-importer or oil-exporter.”

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Oil-users are expected to exhibit bearish behaviour during oil price increases, while oil-producing firms are expected to exhibit the reverse.

“Intuitively, we expect oil-users to exhibit bearish behaviour during periods of oil price increase, whereas the reverse holds true for oilproducing firms.”

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Rising oil prices result in increased production costs, which are transferred to consumers, leading to higher retail prices and higher expected inflation.

“As mentioned in section 2.1, rising oil prices result in increased production costs. However, these costs will be transferred to consumers, leading to higher retail prices and thus higher expected inflation (see Abel and Bernanke 2001; Hamilton 1996, 1988; Barro 1984, among others).”

• cites Abel and Bernanke 2001Not checked yet

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• cites Hamilton 1996, 1988Not checked yet

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• cites Barro 1984Not checked yet

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Increased borrowing costs lead to fewer positive NPV projects and lower cash flows.

“Furthermore, the increased borrowing costs lead to fewer positive NPV projects (lower cash flows).”

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Due to increased discount rates and/or lower cash flows, stock prices decrease in value.

“Thus, either due to increased discount rates and/or lower cash flows, stock prices decrease in value.”

Probably not a substantial claim: may not pass S3 (load-bearing), S4 (based). May combine two claims.

Under a highly credible central bank, inflation expectations remain stable despite an oil price increase, and close to the inflation target.

“Assuming a highly credible central bank, we maintain that inflation expectations will remain stable, despite an oil price increase, and thus close to the inflation target.”

• AssumptionThe authors state this as an assumption: A central bank is highly credible.

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In the case of a low credibility central bank, inflation expectations are volatile, resulting in a larger change of inflation expectation following an oil price increase, leading to a worse impact on stock price levels.

“By contrast, in the case of a low credibility central bank, inflation expectations will be volatile and this results in a larger change of inflation expectation, following an oil price increase, leading to an even worse impact on stock price levels.”

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If consumption and government purchases are substitutes, the opposite impact occurs due to crowding out effects, and stock markets respond negatively.

“By contrast, if consumption and government purchases are regarded as substitutes then the opposite impact will be evident, due to the crowding out effects. Stock markets will respond negatively to such developments, as the substitution effect will drive out the most productive private capital of the economy.”

• AssumptionThe authors state this as an assumption: Consumption and government purchases are substitutes.

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Lower income leads to lower consumption and thus lower aggregate output, which further leads to lower labour demand.

“Lower income leads to lower consumption and thus aggregate output, which further leads to lower labour demand.”

May combine two claims.

Positive oil price changes have both an income and a production cost effect, leading to changes in aggregate output.

“According to this channel, positive oil price changes are expected to have both an income and a production cost effect, which will lead to changes in aggregate output.”

May combine two claims.

Oil price changes affect the time-varying stock market correlations among oil-importing countries, whereas no effects are reported for the correlations among oil-exporting countries.

“They show that oil price changes affect the time-varying stock market correlations among oil-importing countries, whereas no effects are reported for the correlations among oil-exporting countries.”

• cites Antonakakis and Filis (2013)Not checked yet

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Negative changes in oil prices allow for superior prediction of stock price returns compared to positive changes, providing evidence of asymmetric oil price effects.

“Finally, Narayan and Gupta (2015) suggest that there is evidence of asymmetric oil price effects, given that negative changes in oil prices allow for superior prediction of stock price returns, compared to positive changes.”

• cites Narayan and Gupta (2015)Not checked yet

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During geopolitical events the relationship between oil price changes and stock returns is negative, whereas during recessions or economic booms the relationship turns positive; there are no significant relationships between oil exporting and oil importing stock markets.

“For instance Filis et al . (2011) focus on both oil importing and oil exporting countries, and show that during geopolitical events (i.e. unrest in the Middle East) the relationship between oil price changes and stock returns is negative, whereas during recessions or economic booms the relationship turns positive. Even more, the authors do not find any significant relationships between oil Export”

• cites Filis et al. (2011)Not checked yet

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An increase in oil prices worsens the terms-of-trade for an oil-importing economy, resulting in lower income, a negative wealth effect on consumption, and lower aggregate demand.

“Put differently, an increase in oil prices will worsen the terms-of-trade for an oilimporting economy, which will result in lower income and a negative wealth effect on consumption, and in turn to lower aggregate demand (Svensson, 2005 and 2006).”

• cites Svensson, 2005 and 2006Not checked yet

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Classified as probably not a substantial claim. May combine two claims.

Oil price increases tend to trigger negative responses in stock markets, which are of a higher magnitude compared to the positive responses of the latter when oil prices decrease.

“reports that oil price increases tend to trigger negative responses in stock markets, which are of a higher magnitude compared to the positive responses of the latter when oil prices decrease.”

• cites Jiménez-Rodríguez (2015)Not checked yet

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Assuming consumption and government purchases are complements, increased government purchases lead to higher household consumption.

“Assuming that consumption and government purchases are considered complements, then the latter will lead to higher household consumption.”

• AssumptionThe authors state this as an assumption: Consumption and government purchases are complements.

Probably not a substantial claim: may not pass S3 (load-bearing). May combine two claims.

Oil prices do not tend to affect the stock markets of the Gulf Corporation Council countries (GCC), so oil prices cannot be used as predictors for GCC stock markets.

“By contrast, Al Janabi et al . (2010) report that oil prices do not tend to affect the stock markets of the Gulf Corporation Council countries (GCC). Thus oil prices cannot be used as predictors for GCC stock markets.”

• cites Al Janabi et al. (2010)Not checked yet

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In the complements case, private firms are expected to increase cash flows and profitability, pushing stock prices higher and leading to a bullish stock market.

“In such a case, private firms are expected to increase their cash flows and thus their profitability. Such developments will push stock prices to higher levels and the stock market will exhibit a bullish period.”

Classified as probably not a substantial claim.

Oil price effects are different in countries that are oil-exporters compared to countries that are oil-importers.

“Rather, Mohanty et al . (2011) maintains that oil price effects are different in countries that are oil-exporters, compared to these that are oil-importers.”

• cites Mohanty et al. (2011)Not checked yet

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Increased oil prices reduce firms' demand for irreversible investments, which reduces expected cash flows.

“Thus, increased oil prices will reduce firms' demand for irreversible investments, which in turn, reduce expected cash flows.”

May combine two claims.

As uncertainty rises due to increased oil prices, the value of postponing investment and consumption decisions increases, decreasing incentives to invest or consume, dampening economic growth prospects and stock market returns.

“It is worth noting here that as uncertainty rises due to increased oil prices, the value of postponing both investment and consumption decisions increases and thus, a decrease in the incentive to invest or consume is observed, which thereby dampens economic growth prospects (Chuku et al. , 2010) and thus stock market returns.”

• cites Chuku et al., 2010Not checked yet

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Increased oil prices tend to lead to a transfer of wealth from oil-importing economies to oil-exporting ones, allowing increased government purchases.

“Increased oil prices tend to lead to a transfer of wealth from oil-importing economies to oil-exporting ones (Dohner, 1981), which allow for increased government purchases.”

• cites Dohner, 1981Not checked yet

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An oil-exporting economy experiences negative production cost effects but benefits from a positive income effect due to increased oil revenues, leading to higher aggregate demand and higher output.

“On the other hand, even though an oil-exporting economy will also experience negative production cost effects, it will benefit from a positive income effect, due to increased oil revenues (the value of export demand for oil rises), leading to higher aggregate demand and thus higher output.”

May combine two claims.

Before the GFC there was no evidence of asymmetric effects; during and after the GFC, firm-level stock returns are more reactive to negative changes in oil prices.

“More specifically, the results indicate that before the GFC there was no evidence of asymmetric effects. By contrast, during and after the GFC, firm-level stock returns are more reactive to negative changes in oil prices.”

• cites Tsai's (2015)Not checked yet

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Uncertainty from rising oil prices is propagated to households, which reduce consumption of durable goods.

“Furthermore, uncertainty is also propagated to households which reduce their consumption of durable goods (Bernanke 1983; Pindyck 2003).”

• cites Bernanke 1983Not checked yet

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• cites Pindyck 2003Not checked yet

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A negative relationship between oil prices and stock markets holds during the 70s and the 90s; in the 80s there are no significant effects; the negative effects are reversed into positive effects after 1999.

“More specifically, the authors claim that a negative relationship holds during the 70s and the 90s. By contrast, in the 80s the authors cannot report any significant effects of oil prices on stock returns. Finally, they find evidence that the negative effects of oil prices on stock markets are reversed into positive effects after 1999.”

• cites Miller and Ratti (2009)Not checked yet

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Lower aggregate demand leads to lower expected cash flows for firms, which leads to lower stock prices.

“In particular, lower aggregate demand leads to lower expected cash flows for firms, which further leads to lower stock prices.”

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Aggregate demand shocks are related to oil price changes which are influenced by movements in the global business cycle.

“The aggregate demand shocks , according to Kilian's studies are related to oil price changes which are influenced by movements in the global business cycle.”

• cites Kilian (2008b, 2009)Not checked yet

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Increasing (decreasing) freight rates may indicate higher (lower) global demand.

“To put it simply, increasing (decreasing) freight rates may indicate higher (lower) global demand.”

• cites Kilian (2009)Not checked yet

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The effects between oil and stock markets are time-varying and bidirectional; the oil market exercises greater effects on stock markets than the reverse; these bidirectional effects are more prominent after the GFC of 2007-09.

“Finally, Awartani and Maghyereh (2013) show that the effects between oil and stock markets are time-varying and bidirectional. However, it is evident that the oil market exercises greater effects on stock markets rather than the reverse. In addition, they show that these bidirectional effects are more prominent after the GFC of 200709.”

• cites Awartani and Maghyereh (2013)Not checked yet

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Probably not a substantial claim: may not pass S3 (load-bearing). May combine two claims.

Oil prices change in response to either geopolitical or economic events, which suggests that oil prices change due to supply disruptions (supply-side shocks) or economic growth/downturns (demand-side shocks).

“Hamilton (2009a, 2009b) maintains that oil prices change in response to either geopolitical or economic events, which suggests that oil prices change due to supply disruptions ( supply-side shocks) or economic growth/downturns ( demand-side shocks).”

• cites Hamilton (2009a, 2009b)Not checked yet

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Positive aggregate demand shocks are regarded as positive news for stock markets, even though they create an upward movement in oil prices, because they reflect periods of economic growth.

“By contrast, positive aggregate demand shocks seem to be regarded as positive news for stock markets (hence the positive response), even though they create an upward movement in oil prices. This is expected, as positive aggregate demand shocks reflect periods of economic growth, which are positive news for financial markets.”

Probably not a substantial claim: may not pass S3 (load-bearing).

Huang et al. (1996) opine that oil and stock market linkages could potentially be realized through their volatilities.

“Huang et al. (1996) opine that oil and stock market linkages could potentially be realized through their volatilities.”

• cites Huang et al. (1996)Not checked yet

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The correlation between oil and stock markets is time-varying and responds to various oil price shocks; precautionary demand (aggregate demand) shocks lead to lower (higher) correlations between oil and stock market returns; supply-side events do not seem to trigger changes in correlation; results remain qualitatively similar for both oil-importing and oil-exporting economies.

“One of the early findings in this line of research is by Filis et al. (2011), who show that the correlation between oil and stock markets is time-varying and responds to the various oil price shocks. In particular, they show that precautionary demand ( aggregate demand ) shocks lead to lower (higher) correlations between oil and stock market returns and though the magnitude of”

• cites Filis et al. (2011)Not checked yet

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Supply-side shocks do not exercise any effects, whereas negative responses are observed for the two demand-side shocks; positive aggregate demand and precautionary demand shocks lead to lower covariability between the returns and volatility of the US market.

“Their findings show that supplyside shocks do not exercise any effects, whereas negative responses are observed for the two demand-side shocks. In particular, positive aggregate demand and precautionary demand shocks lead to lower covariability between the returns and volatility of the US market.”

• cites Kang et al. (2015a)Not checked yet

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European stock market volatility responds negatively to positive aggregate demand shocks, whereas no significant response is evident to supply-side and precautionary demand shocks; findings hold for aggregate indices and ten industrial sectors.

“Degiannakis et al. (2014), who focus on the European stock market, show evidence that stock market volatility responds negatively (i.e. reduces) to positive aggregate demand shocks, whereas no significant response is evident to supply-side and precautionary demand shocks. Their findings hold true for aggregate stock market indices, as well as for ten industrial sectors.”

• cites Degiannakis et al. (2014)Not checked yet

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Oil price changes are not necessarily exogenous; reverse causality between macro-finance variables and oil prices exists; not all oil price movements are exogenous, but they could be influenced by wider economic activity.

“Overall, the argument behind the development of oil price shocks as a mechanism to explain the effects of the oil market on stock market performance stems from the fact that oil price changes are not necessarily exogenous, as it was the common approach of previous studies. On the contrary, reverse causality, between macro-finance variables and oil prices, does”

• cites Barsky and Kilian (2002)Not checked yet

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Classified as probably not a substantial claim. May combine two claims.

The effects of oil price shocks on eight stock markets are similar to Kilian and Park (2009) but small in magnitude; international financial markets do not really value oil shocks.

“The authors report similar findings with Kilian and Park (2009), nevertheless, they maintain that these effects are small in magnitude and, thus, they conclude that international financial markets do not really value oil shocks.”

• cites Apergis and Miller (2009)Not checked yet

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There are three types of oil price shocks: supply-side, aggregate demand and precautionary demand shocks.

“Kilian (2008b, 2009) maintain that there are three types of oil price shocks, namely, the supply-side , aggregate demand and precautionary demand shocks.”

• cites Kilian (2008b, 2009)Not checked yet

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The most plausible explanation for these unexplained innovations is changes in precautionary demand for oil, so they are named precautionary demand shocks.

“Kilian (2009) suggests that the most plausible explanation is that these innovations can be explained by changes in the precautionary demand for oil and, thus, these are named precautionary demand shocks (also named as the oil-specific demand shocks or the idiosyncratic oil demand shocks).”

• cites Kilian (2009)Not checked yet

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The relationship between each of the three shocks and stock market returns is time-varying, and fluctuates between both positive and negative correlations; the only exemption is the correlation between US stock returns and aggregate demand shocks, which always exhibit a positive correlation; relationships are time-varying and industry specific; the Chinese stock market seems to be more resilient

“This is the first study to explicitly show that the relationship between each of the three shocks and stock markets returns is indeed time-varying, and fluctuates between both positive and negative correlations. The only exemption is the correlation between the US stock returns and aggregate demand shocks, which always exhibit a positive correlation. The authors also proceed”

• cites Broadstock and Filis (2014)Not checked yet

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Disentangling oil price changes according to individual shocks provides significantly incremental predictive information for the regime of US stock returns and volatility; positive supply-side and aggregate demand shocks push the US market into bull territory, whereas precautionary demand shocks do not seem to matter; precautionary demand shock leads to high volatility regime, whereas supply-side

“The authors focus on both US stock market returns and volatility and their findings reveal that, indeed, disentangling oil price changes according to the individual shocks provides significantly incremental predictive information for the regime of US stock returns and volatility. In particular, they show that positive supply-side and aggregate demand shocks push the US”

• cites Angelidis et al. (2015)Not checked yet

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Different oil price shocks trigger different responses from the stock market; stock market returns do not really respond to supply-side shocks, whereas positive (negative) responses are observed during aggregate demand (precautionary demand) shocks.

“Kilian and Park (2009) utilize Kilian's (2009) definitions of oil price shocks for the US stock market, and show that the different oil price shocks trigger different responses from the stock market. In particular, they find that stock market returns do not really respond to supply-side shocks, whereas positive (negative) responses are observed during aggregate demand ( precautionary”

• cites Kilian and Park (2009)Not checked yet

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The global real economic activity index does not measure global output, but is a measure for global industrial commodities demand resulting from worldwide economic activity (the global business cycle).

“The index does not measure global output, but rather is a measure for global industrial commodities demand, as a result of worldwide economic activity (i.e. the global business cycle).”

• cites Kilian (2009)Not checked yet

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Classified as probably not a substantial claim. May combine two claims.

Increasing freight rates suggests that the shipping industry operates closer to full capacity, which is true only during economic booms.

“Increasing freight rates suggests that the shipping industry operates closer to full capacity and this is true only during times of economic booms.”

• cites Kilian (2009)Not checked yet

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Norwegian stock market volatility responds favorably to positive aggregate demand shocks, whereas insignificant effects are reported to supply-side and precautionary demand shocks; only precautionary demand shocks lead to higher volatility in the Korean stock market.

“As far as volatility is concerned, Jung and Park (2011) show that the responses are different between the two countries and among the three shocks. More specifically, they maintain that Norwegian stock market volatility responds favorably (i.e. reduces) to positive aggregate demand shocks, whereas insignificant effects are reported to supply-side and precautionary demand shocks. By contrast, it”

• cites Jung and Park (2011)Not checked yet

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In almost the whole study period (1973-2012) aggregate demand (precautionary demand) shocks exercise a positive (negative) effect, although the magnitude diminishes towards the latter part; supply-side shocks have a significant negative effect in the early years (1973-1980), whereas marginal or insignificant effects are observed thereafter; the largest effect on stock market returns is from

“They show that in almost the whole study period (1973-2012) the aggregate demand ( precautionary demand ) shocks exercise a positive (negative) effect, although the magnitude of the effects diminish towards the latter part of the study. The supply-side shocks seem to have a significant negative effect in the early years (1973-1980), whereas marginal or insignificant effects”

• cites Kang et al. (2015b)Not checked yet

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Probably not a substantial claim: may not pass S4 (based). May combine two claims.

OPEC decisions are somewhat anticipated and, thus, they are discounted by market participants.

“Such findings might be justified by the fact that OPEC decisions are somewhat anticipated and, thus, they are discounted by market participants.”

Probably not a substantial claim: may not pass S3 (load-bearing).

Supply-side shocks are related to restrictions in oil supply by OPEC, via cartel behavior, as a strategy to inflate oil prices.

“According to these studies supply-side shocks are related to restrictions in oil supply by OPEC, via cartel behavior, as a strategy to inflate oil prices.”

• cites Kilian (2008b, 2009)Not checked yet

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Ross (1989) maintains that volatilities from different assets can affect each other.

“Ross (1989) maintains that volatilities from different assets can affect each other.”

• cites Ross (1989)Not checked yet

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Emerging stock markets do not seem to react to supply-side shocks, whereas a positive response is observed for both aggregate demand and precautionary demand shocks.

“They find that emerging stock markets do not seem to react to supply-side shocks, whereas a positive response is observed for both aggregate demand and precautionary demand shocks.”

• cites Basher et al. (2012)Not checked yet

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Innovations to real oil prices not explained by supply-side or aggregate demand shocks should reflect changes in demand for oil for reasons other than industrial commodity demand or OPEC production changes.

“innovations to real oil prices that are not explained by either supply-side or aggregate demand oil price shocks should reflect changes in the demand for oil for reasons other than demand for industrial commodities or production changes by OPEC.”

• cites Kilian (2009)Not checked yet

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Probably not a substantial claim: may not pass S3 (load-bearing). May combine two claims.

Geopolitical unrest, primarily observed in the Middle-East region, does not lead to supply-side oil price shocks; these events trigger precautionary demand shocks, which result due to uncertainty about future availability of oil.

“On the other hand, geopolitical unrest, primarily observed in the Middle-East region, does not lead to supply-side oil price shocks. On the contrary, they posit that these events trigger precautionary demand shocks, which result due to the uncertainty that the geopolitical turbulence imposes on economic agents about the future availability of oil.”

• cites Kilian (2008b, 2009)Not checked yet

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Both demand-side shocks lead to lower stock market volatility in the US.

“Kang et al. (2015a), on the other hand, concentrate on the US market and find that both demand-side shocks (i.e. aggregate demand and precautionary demand shocks) lead to lower stock market volatility.”

• cites Kang et al. (2015a)Not checked yet

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Probably not a substantial claim: may not pass S3 (load-bearing). May combine two claims.

Economic agents expect a shortage in oil supply soon after initiation of geopolitical unrest and, thus, they increase their demand for oil instantly, driving oil prices to higher levels.

“To put it simply, Kilian and co-authors maintain that economic agents expect a shortage in oil supply soon after initiation of geopolitical unrest and, thus, they increase their demand for oil instantly, driving oil prices to higher levels.”

• cites Kilian (2008b, 2009)Not checked yet

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Both the origin of the oil price shock and the type of industry influence the time-varying correlation between oil and sectoral stock returns.

“They find that both the origin of the oil price shock as well as the type of the industry influence the time-varying correlation between oil and sectoral stock returns.”

• cites Degiannakis et al. (2013)Not checked yet

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The time-varying correlation between the technology and energy sectors and oil price changes fluctuates in both positive and negative regions for both sectors.

“He reports that the time-varying correlation between these two sectors and oil price changes fluctuates in both positive and negative regions for both sectors.”

• cites Sadorsky (2012)Not checked yet

  Not checked in the free run.

May combine two claims. The quote only partly states this claim.

For aggregate oil and gas industry returns, findings corroborate previous studies; negative supply-side shocks trigger negative responses from oil and gas sector's returns; for individual oil and gas companies, effects are not company specific but industry-specific, as all shocks trigger positive responses from firm-level stock returns; for upstream, midstream and downstream companies, responses

“Their findings for the aggregate industry's returns corroborate those of the previous studies. Additionally, they also show that even negative supply-side shocks trigger negative responses from the oil and gas sector's returns. Concerning the individual oil and gas companies, we notice that the effects are not company specific but they are industryspecific, as all shocks trigger positive responses”

• cites Kang et al. (2017)Not checked yet

  Not checked in the free run.

May combine two claims.

The effects of oil price shocks are industry-specific; Automobile & Trucks and Retail industries only respond negatively to precautionary demand shocks, whereas Petroleum & Natural Gas and Precious Metals only respond positively to aggregate demand shocks.

“Kilian and Park (2009) also provide evidence that the effects of oil price shocks are industry-specific. In particular, they show that the Automobile & Trucks and Retail industries only respond (negatively) to precautionary demand shocks, whereas Petroleum & Natural Gas and Precious Metals only respond (positively) to aggregate demand shocks.”

• cites Kilian and Park (2009)Not checked yet

  Not checked in the free run.

May combine two claims.

The difference in stock market responses to precautionary demand shocks stems from the fact that even though such shocks are related to geopolitical tensions, the oil-exporting economy can have some short-term benefits from the increase in the price of oil.

“Regarding the difference in stock market responses to precautionary demand shocks, this stems from the fact that even though such shocks are related to geopolitical tensions, the oilexporting economy can have some short-term benefits from the increase in the price of oil.”

Classified as probably not a substantial claim.

The oil market has become more financialized in recent years due to the increased participation of hedge funds.

“Finally, given that the oil market has become more financialized in recent years due to the increased participation of hedge funds studies should investigate further the role of the speculative activity in the oil market and how this financialization has altered its nature.”

• cites Büyüksahin and Robe, 2014Not checked yet

  Not checked in the free run.

• cites Silvennoinen and Thorp, 2013Not checked yet

  Not checked in the free run.

• cites Fattouh et al., 2012Not checked yet

  Not checked in the free run.

Probably not a substantial claim: may not pass S3 (load-bearing), S4 (based).

More recent evidence shows that the relationship between the two markets is time-varying.

“More recent evidence shows that the relationship between the two markets is timevarying.”

Probably not a substantial claim: may not pass S3 (load-bearing), S4 (based).

There are only three studies that examine the informational content of stock markets when forecasting oil prices.

“There are only three studies that examine the informational content of stock markets when forecasting oil prices.”

Probably not a substantial claim: may not pass S3 (load-bearing), S4 (based).

It is typical for authors to use WTI or Brent crude oil prices to measure oil price returns and volatility.

“In terms of data, it is typical for authors to use WTI or Brent crude oil prices to measure oil price returns and volatility.”

Probably not a substantial claim: may not pass S3 (load-bearing). May combine two claims.

Several different methods and different sets of data have been employed in the aforementioned studies.

“It is evident from the aforementioned studies that several different methods have been employed, as well as different sets of data.”

Classified as probably not a substantial claim.

The evidence reported in previous sections does not capture possible heterogeneous relationships between oil price and stock market volatilities over different time periods.

“Thus far, the evidence reported in the previous sections does not capture possible heterogeneous relationships between oil price and stock market volatilities over different time periods.”

Probably not a substantial claim: may not pass S3 (load-bearing).

G7 countries and aggregate European stock market indices have also been considered in the literature.

“Nevertheless, G7 countries and aggregate European stock market indices have been also considered.”

Probably not a substantial claim: may not pass S2 (checkable), S4 (based).

There are various channels that impact firm cash flow and/or their discount rates.

“There are various channels that impact firm cash flow and/or their discount rates.”

Probably not a substantial claim: may not pass S3 (load-bearing). May combine two claims.

There is not much consistency in the measurement of oil price volatility, given that authors use both conditional and realized oil price volatilities.

“Finally, there is not much consistency in the measurement of oil price volatility given that authors use both conditional and realized oil price volatilities.”

Probably not a substantial claim: may not pass S3 (load-bearing).

Studies that consider the time-varying relationship between the two market volatilities also consider the Spillover Index and Connectedness Index by Diebold and Yilmaz (2012 and 2014).

“However, studies which consider the time-varying relationship between the two market volatilities also consider the newly developed Spillover Index and Connectedness Index by Diebold and Yilmaz (2012 and 2014).”

• cites Diebold and Yilmaz (2012 and 2014)Not checked yet

  Not checked in the free run.

Probably not a substantial claim: may not pass S3 (load-bearing).

The existing literature primarily uses aggregate stock markets for the US and GCC countries.

“In terms of stock market data, the existing literature primarily uses aggregate stock markets for the US and GCC countries.”

Probably not a substantial claim: may not pass S3 (load-bearing). May combine two claims.

A small number of studies consider sectoral indices, but only for the US and Europe.

“Finally, a small number of studies consider sectoral indices, but only for the US and Europe.”

The quote only partly states this claim.

For oil-exporting countries, the reverse applies: higher oil prices lead to higher stock market returns.

“The reverse applies for oil-exporting countries.”

Probably not a substantial claim: may not pass S3 (load-bearing). May combine two claims.

Studies use both Brent and WTI crude oil prices, although WTI is more commonly employed.

“More specifically, studies use both Brent and WTI crude oil prices, although the latter is more commonly employed.”

Probably not a substantial claim: may not pass S4 (based).

There is a small number of studies that have evaluated the information content of stock markets in forecasting both oil prices and oil price volatility.

“Furthermore, despite the importance of oil prices for the global economy, the linkages between oil and stock markets (either in returns or in volatilities), as well as the fact that these markets exhibit a dynamic relationship, there is a small number of studies that have evaluated the information content of stock markets in forecasting both oil prices and oil price volatility.”

Probably not a substantial claim: may not pass S3 (load-bearing).

The volatility measure most commonly used in the studies is conditional volatility rather than realized volatility.

“Finally, the volatility measure that is most commonly used in the studies is conditional volatility, rather than the realized volatility.”