Exploring the Effects of Oil Price on Stock Exchange of the Selected Oil Exporting Countries

Abstract The present study explores the relationship between oil price and the stock markets in Iran, UAE, Kuwait, Oman, and Qatar using unit root test, Panel co-integration test and Breusch-Pagan cross-sectional dependence correlation test. For this purpose, the daily data related to oil price, gold price, foreign exchange rate (price of dollar in each country), and stock price index of the countries under study during the time period (January 1, 2008-July 12, 2012) were used. According to Breusch-Pagan test, the results of this study showed that there is a cross-sectional correlation in the intended data. For this reason, seemingly unrelated regressions method was employed for estimation. The results disclosed that oil price has at first a positive effect on the stock price index in countries under study and then it has a negative effect on it. JEL classification: E52, E44, C32