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Title Oil Prices and Stock Market: A Philippine Perspective
Posted by Sheevun Di Guliman
Authors Sheevun Di O. Guliman
Publication date 2015
Journal Business and Economic Research
Volume 5
Issue 2
Pages 122-135
Abstract Oil prices and stock markets play vital functions to a country’s economic condition. Thus, this study examines the dynamic relationship between the inflation adjusted Philippine Stock Exchange index (PSEi) prices and real oil prices in Philippine peso using monthly data from January 1996 to December 2014 applying the Vector Autoregression (VAR) Model. Granger Causality Test, Impulse Response Functions (IRFs) and Forecast Error Variance Decomposition (FEVD) were also used to aid in the analyses of the results. The results of this study suggest that there is no significant relationship between the monthly inflation adjusted stock prices of the PSEi and monthly real oil prices in peso. This paper offers guidance to the investors that the real oil prices do not significantly Granger-cause the movement of the monthly prices of the PSEi. It is suggested that the dynamic relationship between oil prices, industrial production and share prices of sector indices in the Philippines that are highly oil-dependent be investigated in future research considering the oil demand and supply shocks.
Index terms / Keywords Oil price, Stock market, Vector Autoregression, Philippines