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Oil Price Changes and the Oslo Stock Exchange

Ghadakchian, Sheida LU and Pettersen, Arild LU (2012) STAH11 20112
Department of Statistics
Abstract
This paper addresses how oil price changes affect the Oslo Stock Exchange. Multiple linear regressions with eight explanatory variables have been used to investigate the relationship between oil and the Oslo Stock Exchange between 1990-2009. The time period has also been divided into two sub periods to investigate if the effects of oil price changes have become more prominent over the years. After deliberating between univariate and multivariate models we decided to use a multiple linear regression. The six sources of error of the OLS model have been thoroughly discussed and examined. The variables used in the regressions have been selected by revising previous research and economic theory.

The results for the entire period show that... (More)
This paper addresses how oil price changes affect the Oslo Stock Exchange. Multiple linear regressions with eight explanatory variables have been used to investigate the relationship between oil and the Oslo Stock Exchange between 1990-2009. The time period has also been divided into two sub periods to investigate if the effects of oil price changes have become more prominent over the years. After deliberating between univariate and multivariate models we decided to use a multiple linear regression. The six sources of error of the OLS model have been thoroughly discussed and examined. The variables used in the regressions have been selected by revising previous research and economic theory.

The results for the entire period show that oil had a significant positive effect on the stock market with a coefficient of 0.24. This was not unexpected and is in accordance with our hypothesis. The same result was obtained for the first sub-period, 1990-1999. However, looking at the second sub period, 2000-2009, oil proved not to be significant. This result was surprising as it is contradictory to most previous research. Despite not being significant, investigations of the relationship between oil prices and the stock market showed that they remained rather correlated. This profound result is very interesting and might be explained by an underlying variable our model has not been able to capture. (Less)
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author
Ghadakchian, Sheida LU and Pettersen, Arild LU
supervisor
organization
course
STAH11 20112
year
type
M2 - Bachelor Degree
subject
keywords
Oil price, Oslo Stock Exchange, Multiple Linear Regression, Mean Average Process
language
English
id
2300013
date added to LUP
2012-02-09 14:12:03
date last changed
2012-02-09 14:12:03
@misc{2300013,
  abstract     = {This paper addresses how oil price changes affect the Oslo Stock Exchange. Multiple linear regressions with eight explanatory variables have been used to investigate the relationship between oil and the Oslo Stock Exchange between 1990-2009. The time period has also been divided into two sub periods to investigate if the effects of oil price changes have become more prominent over the years. After deliberating between univariate and multivariate models we decided to use a multiple linear regression. The six sources of error of the OLS model have been thoroughly discussed and examined. The variables used in the regressions have been selected by revising previous research and economic theory. 

The results for the entire period show that oil had a significant positive effect on the stock market with a coefficient of 0.24. This was not unexpected and is in accordance with our hypothesis. The same result was obtained for the first sub-period, 1990-1999. However, looking at the second sub period, 2000-2009, oil proved not to be significant. This result was surprising as it is contradictory to most previous research. Despite not being significant, investigations of the relationship between oil prices and the stock market showed that they remained rather correlated. This profound result is very interesting and might be explained by an underlying variable our model has not been able to capture.},
  author       = {Ghadakchian, Sheida and Pettersen, Arild},
  keyword      = {Oil price,Oslo Stock Exchange,Multiple Linear Regression,Mean Average Process},
  language     = {eng},
  note         = {Student Paper},
  title        = {Oil Price Changes and the Oslo Stock Exchange},
  year         = {2012},
}