Cointegration and Priority Relationships Between Energy Stocks and Oil Prices

This study investigates the cointegration and priority relationships between large-cap energy stocks and oil price changes over the last decade. The results reveal that energy stock prices have a long run linear relationship with oil price fluctuations. Asset prices are affected by the oil price deviations from the long run equilibrium as well as the short run dynamics. Moreover, some particular energy stocks have Granger causal impacts on oil market as well. The existence of this bivariate long run cointegration implies that employing portfolio diversification between these two markets would be efficient