Study of the Influence of Oil Prices on Stock Markets’ Indices and Macroeconomic Factors in OPEC Countries and Top Economies and the Prediction of Future Oil Prices

Oil as one of the main fossil fuel energy sources, its price changes and fluctuation has the ability to influence the local economy or even the world economy. Especially for the oil-exporting countries, like OPEC countries, they have big influence on the oil prices. Whilst the proof of oil prices themselves have been examined, the influence of the oil prices on the relationship between different indices and between macroeconomic is not clear and the usage of Holt-Winter model on the oil price prediction has not been proofed.
The aim of this thesis was to determine influence two oil prices (WTI and Brent crude oil prices) on the relationship between top economies in the world (Japan, the UK and the US). To achieve this the simple regression model, the VAR and the VECM model was including to examine the relationship of oil prices with indices and macroeconomic factors. The cointegration tests were used first to test whether they are stationary or non-stationary. Then, the VAR and the VECM model were employed to examine the short-run and long-run relationship between them. In addition, the Holt-Winter model was applied to test its predictability by estimate the oil prices.
This thesis was the first to investigate the influence of oil prices on the relationship between different indices between OPEC countries and top economies’ stock indices. The key findings were that the oil prices changes’ conditions have influence on the relationship between different indices but limited. Secondly, by using the Holt-Winter model indicates that the oil market is inefficient where the prediction period had large difference between real period data. Thirdly, this thesis concluded that the oil prices and macroeconomic variables had causality relationship. These indicate that it is necessary to consider the influence of oil prices when analyse the world economy.