Further insights into the oil and equity market relationship

Olfa Belhassine (Department of Finance and Accounting, Manouba University, Ecole Supérieure de Commerce de Tunis (ESCT), Manouba, Tunisia)
Amira Ben Bouzid (RIM RAF, Manouba University, Ecole Supérieure de Commerce de Tunis (ESCT), Manouba, Tunisia)

Studies in Economics and Finance

ISSN: 1086-7376

Publication date: 24 June 2019



This paper aims to assess the asymmetric effects of oil price shocks and the impact of oil price volatility on the Eurozone’s supersector returns, with a particular emphasis on the impact of the subprime crisis and the euro debt crisis (EDC) on this relationship.


Empirical data consist of daily observations of the 19 EURO STOXX supersector indices and the Brent crude oil price index for the period January 2001 to August 2015. This paper uses a non-linear multifactor market model. This model accounts for heteroscedasticity and breakpoints that are identified by the Bai and Perron (1998, 2003) tests.


The results show that supersector returns are sensitive to oil price shocks. However, in most cases, their responsiveness to oil price volatility is not significant. The relationship between oil price shocks and supersector returns changes through time and depends on the sector. Financial turbulence affects the oil-stock market nexus. In most cases, the subprime crisis has had a positive impact on the oil-stock market relationship, whereas the EDC has had an overall negative effect. Before the subprime crisis, there is an evidence of asymmetric effects for some supersectors. Meanwhile, for most sectors, the asymmetric effects disappear after 2008.


The study improves understanding of the interaction between oil price risk and the Eurozone sector indices returns. Furthermore, it enables global investors to manage the risk inherent to the portfolio managers’ positions.



Belhassine, O. and Ben Bouzid, A. (2019), "Further insights into the oil and equity market relationship", Studies in Economics and Finance, Vol. 36 No. 2, pp. 291-310. https://doi.org/10.1108/SEF-12-2017-0349

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