This dissertation examines the relationship between the price of oil and the UK’s stock market between April 2007 to March 2022. The price of oil is modelled by the Brent crude oil price and the FTSE100 index is used as the UK stock market variable. The model used is a multivariate VAR/VECM analysis in order to understand the long-run and short-run relationship between the price of oil and the UK stock market, to uncover any causality between the variables and also to compare the relationship between three sub-periods. The control variables used within the model are: the UK inflation measure (CPIH), the GBP/USD exchange rate and the short-term and long-term interest rates. The findings of this dissertation are that a significant negative long-run cointegrating relationship is uncovered between the price of oil and the UK stock market price, however, no significant short-run relationship is found. Furthermore, the results showed no short-run causality between the oil price and FTSE100. After the VAR/VECM analysis was conducted, the analysis turned to the crisis periods that were contained within the dataset, these were the financial crisis and the COVID pandemic. Ordinary Least Squares regressions were carried out to unearth and compare the relationship between the price of oil and the UK stock market during these crisis periods, finding a significant negative relationship during the financial crisis, but in contrast, a significant positive relationship was found during the periods between the financial crash and the COVID-19 pandemic and the COVID-19 pandemic itself, in contradiction to theoretical expectations.
PLEASE NOTE: You must be a member of the University of Lincoln to be able to view this dissertation. Please log in here.