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27 Jan 2016
World equities and oil moving together - BBH
FXStreet (Delhi) – Research Team at BBH, suggests that global equities and oil continue to be moving in the same direction which is frustrating for asset managers as large cap and small cap stocks moving together as if everything is being tarred with the same brush.
Key Quotes
“We continue to try to tease out the relationship between equities and oil prices, but there is some underbrush needed to be gotten rid of before we can have a clear space to share our tentative conclusion.
We wanted to digger deeper and looked at the longer-term relationship. We conducted a regression analysis of the daily percent change in oil and the daily percent change in the world equity index since the start of 2000. Based on a linear regression, we found that the change in oil can explain a little less than a fifth of the change in world equities. This may, in fact, overstate the case. Some of those equities, of course, are in the oil sector, like the Royal Dutch Shells, Exxons, Pemex and Petrobras of the world for example. This clearly suggests that while long-term equity investors ought monitor oil prices, the relationship should not be exaggerated.”
Key Quotes
“We continue to try to tease out the relationship between equities and oil prices, but there is some underbrush needed to be gotten rid of before we can have a clear space to share our tentative conclusion.
We wanted to digger deeper and looked at the longer-term relationship. We conducted a regression analysis of the daily percent change in oil and the daily percent change in the world equity index since the start of 2000. Based on a linear regression, we found that the change in oil can explain a little less than a fifth of the change in world equities. This may, in fact, overstate the case. Some of those equities, of course, are in the oil sector, like the Royal Dutch Shells, Exxons, Pemex and Petrobras of the world for example. This clearly suggests that while long-term equity investors ought monitor oil prices, the relationship should not be exaggerated.”