Formation of the Market Prices for Shares under the Influence of Oil Futures

• Main Author: Blahun Ivan I.
• Format: Article
• Language: English
• Published: Research Centre of Industrial Problems of Development of NAS of Ukraine 2018-12-01
• Series: Bìznes Inform
• Subjects: action; derivatives; oil; financial market; futures; price
• Online Access: http://www.business-inform.net/export_pdf/business-inform-2018-12_0-pages-340_347.pdf
• ISSN: 2222-4459; 2311-116X

The article is aimed at research on probability of a dependence between formation of the market prices for shares and the prices for oil futures. Based on the analysis of scientific publications concerning exploration of the oil pricing problems, their influence on the macro-economic parameters, as well as on the dynamics of market development, the author suggests a hypothesis about existence of the correlation between price determination of the oil futures and prices for the basic financial instrument of financial market – shares. The dynamics of both the index of FSTS and the prices for Brent oil are analyzed. The analysis found that the prices for oil futures are more volatile than the dynamics of the exchange index of FSTS, resulting in a relatively higher risk of the oil-related investments. It is determined that the use of regression models to evaluate the investment risk has certain limitations. The solutions offered by the models with the error correction mechanism and the VAR models allow to better understanding of the nature of price formation, as well as the formation of price relations between different products. As result of the research of co-integration on the basis of the model, in which the price for Brent oil future acted as a dependent variable, is determined that the long-term balance between oil prices and the exchange index of FSTS is not manifested, but there is a interrelation between them in the short term.