Finance – Econometrics : “The US stock market reaction to oil price changes” (Graduate level)<\/p>\n
The homework is to write a technical report \/ project \/ short essay (12 to 15 pages) in order to reproduce a research paper by implementing the same models<\/p>\n
(regressions) (using matlab) and discuss it. The paper is “The stock market reaction to oil price changes” written by S.Gogineni (file enclosed).<\/p>\n
The paper deals with the impact of daily oil price changes on the stock returns : index and industries individually, on a daily basis, from 1983 to 2006. It would be<\/p>\n
better to replicate the experiments using a larger scale of data, for instance we could do the same thing for 1983-2015.<\/p>\n
It’s mandatory that I deliver the written report (including tables etc in annex), the data used, the matlab code and \/ or excel sheets. (Self-containedness and correct<\/p>\n
program execution are required)<\/p>\n
Structure must be : Introduction – Problem statment – Solution methodology – Implementation detail – Results and comments – Annexes<\/p>\n
To summarize, the objectif is to deeply understand the paper (the only source), to reproduce it, preferably including more recent data. I would say that this initial<\/p>\n
paper aims at 3 things :<\/p>\n
1) Investigation of the impact of oil price changes on the US market using daily data from 1983 to 2006<\/p>\n
2) Examine the impact of oil prince changes on the returns of individual industries using a cost-side and demand-side dependance on oil from 1998 to 2006 (61 in this<\/p>\n
paper, data from the Input-Output data from bureau of economic analysis to estimate industries cost-side and demand-side dependance measures)<\/p>\n
3) Differentiate between the impact of daily oil price changes likely caused by supply shifts and those caused by changes in expectations about future economic<\/p>\n
activity<\/p>\n
Data : :<\/p>\n
1) The author used daily weighted returns of NYSE \/ NASDAQ \/ AMEX index obtained from CRSP as a measure of stock market returns and daily cash price data of light<\/p>\n
crude oil.<\/p>\n
I don’t have access to these data, so you can use the source you want, but I will need the file you will have used. I don’t really know what’s the more convenient, but<\/p>\n
it’s not mandatory that you use exactly the sames indexes. It would be preferable, but I mean that the aim of the work is to replicate the models and objectives of the<\/p>\n
article, not necessarly from the same data etc<\/p>\n
2) He used the benchmark input-output (IO) accounts published by the Bureau of Economic Analysis to calculate industries dependence on oil. I’m not really sure about<\/p>\n
the file but I did find one of the two files about Input-Output balance the author mentionned. They are available from 1997 to 2015 for 71 industries<\/p>\n
This is to implement the cost – side dependence = dollar value of oil used as an inpud \/ dollar value of industry’s output<\/p>\n
I’ve uploaded a file but i’m not sure, so feel free to use the one that is the best to replicate the experiment, here is the link<\/p>\n
https:\/\/www.bea.gov\/industry\/io_annual.htm<\/p>\n
3) Data from 1) 2) for computing<\/p>\n
Here are the hypothesis that the author tested using 10 simple regressions (cf tests \/ empirical results)<\/p>\n
Relation between oil price changes and market returns<\/p>\n
Hypothesis I: The stock market reacts negatively to oil price changes.<\/p>\n
Hypothesis II: While large oil price changes have a large negative impact on market returns, the impact of small oil price changes is positive.<\/p>\n
Market efficiency and oil price changes<\/p>\n
Hypothesis III: The stock market under- reacts to daily oil price changes<\/p>\n
Hypothesis IV: The stock market\ufffd\ufffd\ufffd\ufffd\ufffd\ufffd\ufffds reaction to oil price increases is larger than its reaction to oil price decreases.<\/p>\n
Sensitivity of industry returns to oil price changes<\/p>\n
Hypothesis V: There is a positive relationship between an industry\ufffd\ufffd\ufffd\ufffd\ufffd\ufffd\ufffds cost-side dependence on oil and its sensitivity to oil price changes.<\/p>\n
Hypothesis VI: There is a positive relationship between an industry\ufffd\ufffd\ufffd\ufffd\ufffd\ufffd\ufffds demand-side dependence on oil and its sensitivity to oil price changes.<\/p>\n","protected":false},"excerpt":{"rendered":"
Finance – Econometrics : “The US stock market reaction to oil price changes” (Graduate level) The homework is to write a technical report \/ project \/ short essay (12 to 15 pages) in order to reproduce a research paper by Read More …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-5723","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/5723","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=5723"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/5723\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=5723"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=5723"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=5723"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}