Relationship between Changes in Oil Price and the Global Stock Market Performance

Abstract

Due to heavy reliance of oil as a source of energy and commodity, global economy is significantly influenced by fluctuation of oil prices. A previous study examined the relationship between the daily oil price changes and the U.S. stock market, and contrary to the common belief, the examination of data indicated positive relationship between the movements of stock prices and the changes in oil prices in long-term. This study expands its scope to relationship between global stock market performance and oil price and confirmed that the global stock market highly correlated with oil price. In addition, the study confirmed key assumption of previous study that sudden supply shock of oil caused by geopolitical event or oil supply control causes deviation between movement of oil price and stock market performance.