Oil and Stock Prices: Challenging a Widely Held Belief

Oil and Stock Prices: Challenging a Widely Held Belief
http://my.elliottwave.com/resources/free/market-myths-exposed.pdf?tcn=ytv1703
Is there a negative correlation between oil and stock prices? This chart puts a widely held assumption to the test.
http://www.elliottwave.com/r.asp?rcn=ytvideos1403&url=http://www2.elliottwave.com/club/signuplt/newsletters.aspx

Oil and Stock Prices: Challenging a Widely Held Belief

One thought on “Oil and Stock Prices: Challenging a Widely Held Belief”

  1. You are considering stock prices and oil prices alone, there is a third variable that has to be accounted for, and that is the money supply, or to be more precise the Federal T-bond interest rate. When the money supply is high, because fed rates are low, there is more liquidity in the stock market, hence stocks tend to increase, and the other way in the opposite case.

    The oil market is related to supply and demande balance, the level of industrial activity, and the amount of liquidity in the money market.

    Henceforth, there are four actors; oil prices, industrial activity, interest rates, and stock prices. They all interact with each other at the same time. Watching only the interaction of two of them makes you lose the picture, and you may even reach a conclusion of no correlation which is false. I conducted a research of causality using econometric tools and a VAR model.

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