The analyses are based on 3912 observations for both stock prices returns and exchange rate returns.
Fig. 1 Impulse response of stock price return to oil price shock per company.
We measure a corporation's short-term and long-term stock performance by its beta ( β i ) and its yearly stock price return ( r i ), respectively.
In addition, a bivariate system with stock price return and oil price shock was proposed to analyze the impulse and variance decomposition structure.
In its reaction to oil in periods 3 and 4, the stock price return rises and falls with standard deviation values of 0.00056 and 0.00158.
The yearly stock price return is given by r i = log ( p i ( t f ) / p i ( t o ) ), where p i ( t o ) and p i ( t f ) are the daily closing stock prices of corporation i at the beginning and at the end of the calendar year, respectively.
First, we find that the fewer degrees of separation between two corporations in the interlocking network, the stronger the temporal correlation between their stock price returns.
Figure 1 presents the impulse response function result for stock price returns to an oil shock at the firm level (see also Appendix 3).
We obtain stock price returns (spr) from the stock price using the transformation spr = ln spt) − ln spt− 1), where spt denotes the stock price at time t and spt− 1 denotes the stock price lagged by one period.
This phenomenon suggests that when stocks have a greater differential between trade price and the bid-ask price midpoint, regardless of the current stock price, returns suffer from this loss of liquidity, accordingly.
