From late 2008 to 2014, oil and equity returns were more positively correlated than in other periods. In addition, we show that both oil and equity returns became more responsive to macroeconomic news. We provide empirical evidence that these changes resulted from the zero lower bound (ZLB) on nominal interest rates, consistent with the theoretical predictions of a model that includes the ZLB. Although the ZLB alters the economic environment in theory, supportive empirical evidence has been lacking. Our paper provides clear evidence of the ZLB altering the economic environment.
Datta, Deepa D., Benjamin K. Johannsen, Hannah Kwon, and Robert J. Vigfusson.
"Oil, Equities, and the Zero Lower Bound."
American Economic Journal: Macroeconomics,
General Aggregative Models: Keynes; Keynesian; Post-Keynesian
Business Fluctuations; Cycles
Interest Rates: Determination, Term Structure, and Effects
Equities; Fixed Income Securities
Information and Market Efficiency; Event Studies; Insider Trading
Energy and the Macroeconomy