Crude oil and stock markets: Causal relationships in tails?

Ding, Haoyuan; Kim, Hyunggun; Park, Sung Y.

doi:10.1016/j.eneco.2016.07.013

Cited by 92 publications

(48 citation statements)

References 42 publications

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“…For instance, Turhan et al (2014) show that in recent years oil prices have been determined not only by aggregate supply and demand, but also by investment preferences and investors'behavior. This …nding has been supported by other studies that have encountered bidirectional causality between oil prices and stock market returns, specially during periods of …nancial distress (Lee et al, 2012;Ding et al, 2016;and, Zhang, 2017).…”

Section: Introductionsupporting

confidence: 79%

“…The oil …nancialization literature has motivated interest in the study of the direction of causality between crude oil prices and stock market returns. Papers in this strand have recently grown in number and many of them have detected bidirectional relations between oil prices and stock market returns (Arouri and Nguyen, 2010;Lee et al, 2012;Ajmi et al, 2014;Ding et al, 2016;Bouri et al, 2017). Although many papers studying causality use information on stock markets of several countries, all of them focus in bivariate relations.…”

Section: Brief Literature Reviewmentioning

confidence: 99%

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Uncovering the time-varying nature of causality between oil prices and stock market returns : a multi-country study

Gómez-González¹,

Hirs-Garzón²

2017

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We study the relation between oil prices and stock market returns for a set of six countries, including important oil consumers and demanders. We study interconnectedness between oil and stock markets and characterize the dynamics of transmission and reception between them. We test for Granger causality between markets dynamically, endogenously identifying periods for which oil prices have responded to innovations in …nancial markets. Our results on connectedness show that the direction of transmission is mainly from stock markets to crude petroleum prices. Additionally, connectedness increased importantly around the global …nancial crisis, and reports high levels until 2014. Regarding causality, we …nd evidence of bidirectional relations between stock market returns and crude petroleum prices. Causality is stronger during times of …nancial volatility as well. Our results have important implications both for investors and policy makers. JEL Classi…cation:G01; G12; C22.

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Section: Introductionsupporting

confidence: 79%

Section: Brief Literature Reviewmentioning

confidence: 99%

Uncovering the time-varying nature of causality between oil prices and stock market returns : a multi-country study

Gómez-González¹,

Hirs-Garzón²

2017

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“…For the lagged coeffi cients of dex , , , However, recent studies (e.g. Ding et al, , 2016 have proposed some concerns that may undermine the validity of the classic Granger causality test. Specifi cally, the classic Granger causality test requires the considered variables to be stationary, which must be verified before the implementation of the formal test.…”

Section: Linear Granger Causality Testmentioning

confidence: 99%

Tail Causality between Crude Oil Price and RMB Exchange Rate

Ding

Jin

Qin

et al. 2019

China & World Economy

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In this paper we assess the causal relationship between international crude oil price changes and the RMB exchange rate using daily information from 21 July 2005 to 5 April 2017. In addition to linear causality tests, we employ quantile causality test to identify prior imperceptible causality in quantiles. We fi nd a causal relationship from crude oil price to exchange rate at each quantile interval, but the reverse only appears in tail. This may help to explain why a traditional linear test fails to capture the causality from exchange rate to crude oil price as the quantile causalities in tails are canceled out by each other. Moreover, using RMB as the settlement currency in crude oil trade can weaken the prior signifi cant causal relationships between crude oil price and exchange rate, whereas the reform of exchange rate marketization reignites the tail causalities from exchange rate to crude oil price. These fi ndings recommend a wider use of domestic currencies in crude oil trade to avoid risk from the crude oil market.

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“…Their findings were complemented by Ding et al . () which investigated the causal relationships between oil shocks and five stock indexes (S&P 500, Nikkei, Hang Seng, Shanghai and KOSPI) and reported an asymmetric causality between oil price shocks and different stock markets. In evidence from China (a large importer), Peng et al .…”

Section: Nexus Between Oil Prices and Stock Marketmentioning

confidence: 99%

“…Likewise, Ding et al . () documented heterogeneity in the response of different stock markets to oil prices shocks while analysing four Asian (Chinese, Hong Kong, Korean and Japanese) and one in the US stock market. Similarly, Broadstock and Filis () found Chinese stock market more resilient to oil shocks than the United States.…”

Section: Introductionmentioning

confidence: 99%

A Treatise on Oil Price Shocks and their Implications for the UK Financial Sector: Analysis Based on Time‐Varying Structural VAR Model

Nasir

Rizvi

Rossi

2017

The Manchester School

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In this paper, we examined the association among the energy sector stock, oil prices and stock market on the whole. We also considered the UK position from the net oil exporter to net oil importer and implications of the Global Financial Crises. Employing a Time‐Varying Vector Auto‐regressive framework on monthly data from January 1990 to June 2015 in which the sources of time variation were both the coefficients and variance‐covariance matrix of the innovations, this study found that historically oil price shocks have negatively affected the stock market, however the energy sector stock has always responded positively holding their title as hedge against oil shocks. It was also found that the shift from net oil exporter to net oil importer did not influence the association between the UK stock market and oil shocks much. Including the discrete break and subsampling of series led to controlling for the prior beliefs and agent's behaviour in the Pre‐GFC period. It turned out that the GFC had been a game changer and the stock market as well as the energy sector showed a positive and symmetric response to oil shocks. These findings have profound implications in terms of depressed global aggregate demand and oil shocks dynamics in the Post‐GFC world.

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Crude oil and stock markets: Causal relationships in tails?

Cited by 92 publications

References 42 publications

Uncovering the time-varying nature of causality between oil prices and stock market returns : a multi-country study

Uncovering the time-varying nature of causality between oil prices and stock market returns : a multi-country study

Tail Causality between Crude Oil Price and RMB Exchange Rate

A Treatise on Oil Price Shocks and their Implications for the UK Financial Sector: Analysis Based on Time‐Varying Structural VAR Model

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