Dynamic Correlation between Oil Price and the Stock Markets: Evidence from some Developed and Emerging Countries

The aim of this paper is to examine the dynamic correlation and volatility between energy prices and stock market for some developed and emerging countries namely China, Germany, Russia, UK, and the USA, using daily data for the period 5 September‐2014 to 28 August‐2015 and by applying the Orthogonal GJR‐GARCH. The price of oil plays a strategic role in the global economy. Many studies have highlighted its different impacts on macroeconomic variables such as GDP growth, unemployment rate, inflation, the stock market, etc. We collect the energy prices from the Energy Information Administration (EIA), and the stock indices from Thomson Reuters Data Stream. Results show a strong positive correlation between the stock market and energy prices in Russia and USA. In addition, the SSE Composite index presents positive correlation with oil prices. Finally, both UK and in Germany the stock market index shows a lower and mixed correlation measures with all energy prices during the full period.