The impact of oil price shocks on the U.S. stock market: A note on the roles of U.S. and non-U.S. oil production

- Effects of U.S. and non-U.S. oil supply shocks on U.S. stock returns are examined.
- Positive U.S. oil production shocks have positive effects on U.S. real stock returns.
- Distinguishing U.S. and non-U.S. oil supply shocks is important at industry level.
- Oil demand and supply shocks are both important in explaining U.S. stock returns.
- U.S. oil production shocks explain 9.6% of automobile industry stock returns.

Kilian and Park (2009) find shocks to oil supply are relatively unimportant to understanding changes in U.S. stock returns. We examine the impact of both U.S. and non-U.S. oil supply shocks on U.S. stock returns in light of the unprecedented expansion in U.S. oil production since 2009. Our results underscore the importance of the disaggregation of world oil supply and of the recent extraordinary surge in the U.S. oil production for analysing impact on U.S. stock prices. A positive U.S. oil supply shock has a positive impact on U.S. real stock returns. Oil demand and supply shocks are of comparable importance in explaining U.S. real stock returns when supply shocks from U.S. and non-U.S. oil production are identified.