LAUSR

Abstract The majority of past studies assessed the impact of oil price on stock returns using aggregate stock price index from different countries and assuming the effects to be symmetric. In this paper, we investigate asymmetric causality not only from oil price to stock returns but also from stock returns to oil price. To reduce aggregation bias, we use data from nine different sectors of the U.S. economy. We found that an increase in oil price causes returns of three sectors, while a decrease in oil price causes returns of four sectors, all in the short run. On the other hand, we found that an increase in returns in three sectors causes oil price to rise, while a decrease in returns in six sectors causes oil price to decline. We do not discover significant long-run causal relationship in either direction.