Finance and Credit

Oil market pricing and the impact on stock market

Vol. 24, Iss. 1, JANUARY 2018

Received: 22 November 2017

Received in revised form: 6 December 2017

Accepted: 20 December 2017

Available online: 29 January 2018

Subject Heading: Securities market

JEL Classification: E37, E44, E47, F20, G15

Pages: 178–188

Mikhailov A.Yu. Financial University under Government of Russian Federation, Moscow, Russian Federation

ORCID id: 0000-0003-2478-0307

Burova T.F. Financial Research Institute of Ministry of Finance of Russian Federation, Moscow, Russian Federation

ORCID id: not available

Importance The article studies the main features of pricing in the oil market, as well as the influence of oil prices on the stock indices of countries.
Objectives The paper aims to analyze the major trends in the oil market and develop a model to predict the impact of oil prices on stock market indices.
Methods This work uses the probit-model with the real prices for Brent crude oil, a three-month interest rate in the money market, consumer price index, and the GDP growth rate, as binary dependent variables.
Results The article reveals tendencies of pricing at different stages of oil market development and shows the influence of oil prices on stock indices, both developed countries and Russia. Also, it offers a forecast of oil prices between 2017–2019.
Conclusions The practical significance of this work is the structuring of existing knowledge about the applicability of probit-models in the conditions of the Russian economy. Based on the forecast of supply and demand in the oil market in the nearest three years, the paper says oil prices will not be subject to growth. The effect of oil prices on stock markets is asymmetrical, in general, except for the Russian and Canadian stock markets, where correlation coefficients are positive. This is because Russia and Canada have a prevailing share of crude oil and hydrocarbons in net exports.

Keywords: oil pricing, price forecasting, stock market returns, probit-regression


  1. Driesprong G., Jacobsen B., Maat B. Striking Oil: Another Puzzle? Journal of Financial Economics, 2008, vol. 89, iss. 2, pp. 307–327. URL:
  2. Du L., He Y. Extreme Risk Spillovers Between Crude Oil and Stock Markets. Energy Economics, 2015, no. 51, pp. 455–465. URL:
  3. Engemann K.M., Kliesen K.L, Owyang M.T. Do Oil Shocks Drive Business Cycles? Some U.S. and International Evidence. Macroeconomic Dynamics, 2011, vol. 15, iss. S3, pp. 498–517. URL:
  4. Estrella A. A New Measure of Fit for Equations with Dichotomous Dependent Variables. Journal of Business and Economic Statistics, 1998, vol. 16, iss. 2, pp. 198–205. URL:
  5. Hamilton J.D. Oil and the Macroeconomy Since World War II. Journal of Political Economy, 1983, vol. 91, iss. 2, pp. 228–248.
  6. Hamilton J.D. This Is What Happened to the Oil Price – Macroeconomy Relationship. Journal of Monetary Economics, 1996, vol. 38, iss. 2, pp. 215–220. URL:
  7. Hamilton J.D. Nonlinearities and the Macroeconomic Effects of Oil Prices. Macroeconomic Dynamics, 2011, vol. 15, iss. S3, pp. 364–378. URL:
  8. Mikhailov A.Yu. [An assessment of efficiency of investment funds functioning in Russia]. Vestnik Instituta Ekonomiki RAN, 2012, no. 5, pp. 121–128. URL: (In Russ.)
  9. Jiménez-Rodríguez R. Oil Price Shocks and Stock Markets: Testing for Non-linearity. Empirical Economics, 2015, vol. 48, iss. 3, pp. 1079–1102. URL:
  10. Jones C.M., Kaul G. Oil and the Stock Markets. Journal of Finance, 1996, vol. 51, iss. 2, pp. 463–491. URL:
  11. Kauppi H., Saikkonen P. Predicting U.S. Recessions with Dynamic Binary Response Models. Review of Economics and Statistics, 2008, vol. 90, iss. 4, pp. 777–791. URL:
  12. Kilian L. Not All Oil Shocks Are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market. The American Economic Review, 2009, vol. 99, no. 3, pp. 1053–1069. URL:
  13. Kilian L., Park C. The Impact of Oil Price Shocks on the U.S. Stock Market. International Economic Review, 2009, vol. 50, iss. 4, pp. 1267–1287. URL:
  14. Leung M.T., Daouk H., Chen A.-S. Forecasting Stock Indices: A Comparison of Classification and Level Estimation Models. International Journal of Forecasting, 2000, vol. 16, iss. 2, pp. 173–190. URL:
  15. Mikhailov A.Yu. [Russian Economic Development Factors in 2015]. Voprosy regulirovaniya ekonomiki = Journal of Economic Regulation, 2014, vol. 5, iss. 4, pp. 62–68. URL: (In Russ.)
  16. Mikhailov A.Yu. [Estimate of efficiency of investment fund activity]. Finansovaya analitika: problemy i resheniya = Financial Analytics: Science and Experience, 2012, no. 4, pp. 43–53. URL: (In Russ.)
  17. Mork K.A. Oil and the Macroeconomy When Prices Go Up and Down: An Extension of Hamilton's Results. Journal of Political Economy, 1989, vol. 97, iss. 3, pp. 740–744.
  18. Mork K.A., Olsen O., Mysen H.T. Macroeconomic Response to Oil Price Increases and Decreases in Seven OECD Countries. Energy Journal, 1994, vol. 15, iss. 4, pp. 19–35. URL:
  19. Nandha M., Faff R. Does Oil Move Equity Prices? A Global View. Energy Economics, 2008, vol. 30, iss. 3, pp. 986–997. URL:
  20. Narayan P.K., Sharma S.S. New Evidence on Oil Price and Firm Returns. Journal of Banking and Finance, 2011, vol. 35, iss. 12, pp. 3253–3262. URL:

View all articles of issue


ISSN 2311-8709 (Online)
ISSN 2071-4688 (Print)

Journal current issue

Vol. 24, Iss. 1
January 2018