The Increasing Influence of Oil Prices on the Canadian Stock Market

This paper examines the influence of oil prices on Canadian stock market using the cause-effect relationship between oil prices and the TSX index. Additionally, the relationship between the Canadian to US Dollar exchange rate and the TSX index was investigated. Results show that in the last three years, the impact of oil prices on the TSX index has become much stronger than that of the preceding 18 years. Additionally, the importance of the exchange rate compared to oil market in predicting the TSX index seems to be declining. In particular, this decrease is more noticeable after the recent North American financial markets slump in late 2008