Oil price shocks and stock market returns in a net oil exporting economy: An empirical analysis of Norway

Abstract

We investigate the impact of oil price shocks on the Norwegian stock market returns for the period 1997-2017. We employ different oil price specifications in dynamic VAR models and in alternative models, to examine how the Norwegian stock market responds to oil price shocks, both positive and negative. We pay specific attention to the asymmetry of the stock market responses regarding increase and decreases in oil price. We find that the impact of oil price shocks differs along the different sectors and the benchmark index. In general, our findings indicate that oil price impacts stock market returns in the same month or within one month of the shock. The exception is the Energy sector (OSE10), where the impact is significant in or within 24 months. Further, we find little evidence of any asymmetry between the impact of oil price decrease and increase on the Norwegian stock market.