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Teoh, Hooi Khim (2005) Financial Markets’ Reaction and World Crude Oil Price Shocks. [Dissertation (University of Nottingham only)] (Unpublished)

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Abstract

Recent upsurge in the world crude oil price and the significant impact of oil shocks in the past few decades on the world economy had drawn numerous research considerations, in particular the impacts on macroeconomic variables in countries such as United States, United Kingdom and Japan (Abeysinghe, 2001; Hamilton, 1983; Hamilton, 1996; Hooker, 2002; Hutchison, 1993). Nevertheless, the impact of oil shock on the stock market reactions had surprisingly received little attention so far. The main objective of this study is therefore to investigate the impact of world crude oil shocks on the Asia Pacific stock markets for the period of 1973 to 2004 using the event study methodology. This period covers the first major oil shock in history up to the recent time of oil price increases. Countries included for this study are: China, India, Japan, South Korea, Taiwan, Thailand, Singapore, Malaysia and Indonesia. In order to facilitate the comparison of the stock market reaction between Asia Pacific economic and Western economic, countries such as United States, United Kingdom, France and Netherlands are included as well. These benchmarks are selected as the headquarters of the major international oil and gas companies, e.g. ChevronTexaco, ExxonMobil, BP Amoco, TOTAL and Royal Dutch Shell are located in these countries. Data analysis of these financial markets will be performed by country and event level. It is hypothesized that an oil price increase will cause negative abnormal returns in the stock market performance; while, an oil price decrease will cause abnormal returns in the stock market performance. In the past, oil price increases had normally resulted in economic recession whereas the impact of oil price decreases was less profound. The findings of this study were in agreement with the proposed hypotheses. Crude oil price is determined by the interplay of demand and supply forces, in which the movement in oil price can be anticipated beforehand. Consequently, it was found that the financial markets were inefficient in the semi-strong form as the market participants managed to assimilate the information regarding oil prices long before the event date.

Item Type:	Dissertation (University of Nottingham only)
Depositing User:	EP, Services
Date Deposited:	28 Sep 2010 04:21
Last Modified:	16 Feb 2018 05:54
URI:	https://eprints.nottingham.ac.uk/id/eprint/24226

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