Regime Switching Model of US Crude Oil and Stock Market Prices: 1859 to 2013

摘要: This paper examines the relationship between US crude oil and stock market prices, using a Markov-Switching vector error-correction model monthly data set from 1859 to 2013. The sample covers entire modern era of petroleum industry, which typically begins with first drilled well in Titusville, Pennsylvania 1858. We estimate two regime that divides into high- low-volatility regimes based on variance-covariance matrix prices. find high-volatility more frequently exists prior Great Depression after 1973 price shock caused by Organization Petroleum Exporting Countries. occurs when markets fell largely under control major international companies end 1973. Using National Bureau Economic research business cycle dates, we also likely economy experiences recession.