Do higher oil prices push the stock market into bear territory?

This paper investigates whether a higher oil price pushes the stock market into bear territory, by using time-varying transition-probability Markov-switching models. It examines different measures of oil price shocks. Empirical evidence from monthly returns on the Standard & Poor's S&P 500 price index suggests that an increase in oil prices leads to a higher probability of a bear market emerging. (C) 2009 Elsevier B.V. All rights reserved.