Oil price shocks and the Norwegian stock market. To what extent has oil price shocks from 2000-2023 influenced stock returns in Norway, and how does this impact vary across different sectors?

Abstract

In this thesis, we study the relationship between oil price shocks and stock returns on a sectoral level in Norway for the period 2000-2023. Beyond solely examining changes in oil prices, we augment our analysis by incorporating three distinct oil shock variables: oil consumption demand shock, oil supply shock, and economic activity shock. This comprehensive approach enriches our investigation and provides deeper insights into the intricate relationship between oil price fluctuations and stock returns. To investigate our research question we have utilized different methodologies, the main ones being Capital asset pricing model (CAPM), Fama-French three-factor model, Carhart four-factor model, and Vector Autoregressive model (VAR). Our results indicate a reliance of oil price changes on stock returns in Norway, with sectors having varying degrees of sensitivity to these fluctuations.