The optimal thermal causal path analysis on the relationship between international crude oil price and stock market

Yao, Can Zhong; Kuang, Peng Cheng; Lin, Ji Nan

doi:10.1108/k-04-2017-0139

Cited by 13 publications

(11 citation statements)

References 27 publications

(29 reference statements)

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“…Singh and Sharma (2018) estimated the dynamic relationship between gold, crude oil, US dollar, exchange rate and Sensex and found a long-run relationship between crude oil and Sensex. Another study was conducted on GCC countries by (Yao et al, 2018) where the authors studied the lead-lag structure between the oil price and stock market. A similar study was conducted on GCC countries to find out the degree of dependence between crude oil and equity markets (Mokni and Yousseff, 2019) and found there is a positive influence of crude prices on equity markets of GCC countries with a high degree of dependence on Saudi Arabia equity market.…”

Section: Review Of Related Literaturementioning

confidence: 99%

A dynamic relationship between crude oil price and Indian equity market: an empirical study with special reference to Indian benchmark index Sensex

Yadav

Tandon

Tripathi

et al. 2020

BIJ

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PurposeThe purpose of the study is to investigate the long-run and short-run dynamic relationship between crude oil prices and the movement of Sensex for the period of 2000–2018.Design/methodology/approachThe study uses the augmented Dickey–Fuller test for the presence of unit root, Johansen cointegration test for estimating the cointegration among the variables. Further, in the case of no cointegration found, the study employed the vector autoregression (VAR) model to estimate the long-run relationship and the Granger causality/Wald test for short-run relationship. The study also conducted tests for the prerequisites of the model: serial correlation, heteroskedasticity and normality of data.FindingsThe study found that both the variables, crude oil prices and Sensex are integrated of order 1, that is, I (1), and there is no cointegration between them. Further, the results proliferated from the VAR model unfold the marked effect of previous month crude oil prices (lag 1) on the movement of Indian stock market represented by Sensex considered as the benchmark index. Furthermore, VAR–Granger causality/block exogeneity Wald tests results indicated that there is a causal relationship between the crude oil prices and Sensex under the VAR environment. The model does not have any serial correlation and heteroskedasticity indicating toward the unbiased and robust estimates.Research limitations/implicationsThe study is conducted till the year 2018, and data for the present period (post-2018) is excluded due to ongoing trade issues between the USA and oil-exporting countries such as Iran. The current COVID-19 outbreak has also put serious issues. Due to limited time and availability of standardized data, researchers have considered Sensex as equity index only, but for more generalized research outcome few other equity indexes could have been taken for study.Originality/valueThe study is completely original in nature and is an extensive study of the relationship between the crude oil price and Indian stock market with reference to causality between the variables.

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Section: Review Of Related Literaturementioning

confidence: 99%

A dynamic relationship between crude oil price and Indian equity market: an empirical study with special reference to Indian benchmark index Sensex

Yadav

Tandon

Tripathi

et al. 2020

BIJ

View full text Add to dashboard Cite

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“…Wen et al (2020) found that there exists upside and downside risk spillover effects that are stronger from exchange rates to crude oil than those from oil to exchange rate markets. Yao et al (2018) show that the stock markets significantly led international crude oil prices, revealing varying leadlag orders among stock markets. Zhang & Wu (2018) found significant bidirectional linear causality between WTI crude oil returns and China's traditional energy sectoral stock returns, but the nonlinear causality appears weaker, and the influence of WTI crude oil returns on traditional energy sectoral stock returns has time-varying characteristics and industry heterogeneity both in the linear and nonlinear cases, and finally, the decline of WTI crude oil prices may strengthen its linear influence on the stock returns of traditional energy sectors, while the excessive rise of market values in traditional energy sectors may weaken the linear and nonlinear influence of WTI on them.…”

Section: Literature Reviewmentioning

confidence: 99%

The Effect of Crude Oil Price on Merchandise Trade: Evidence from East Asia and Pacific

Artha

Bahri

Asri

et al. 2021

JBMR

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One of the most important production inputs is energy, particularly crude oil. The impacts of oil price fluctuations on global trade flows can be understood by the uncertainty channel, fluctuations in oil prices may create uncertainty about the future path of the oil price, causing consumers to postpone irreversible purchases of consumer durable goods, and also causing firms to postpone irreversible investments, and also recent hikes and fluctuations in oil prices since 1999 have attracted attention and invoked concerns about their devastating effects on a variety of economic activities. The objective of this research is to determine the influence of crude oil price to merchandise trade in East Asia and Pacific. This research uses quantitative methods and linear regression analysis. The results of the analysis show that there is negative and significance effect of crude oil price on merchandise trade in East Asia and Pacific for the period 1987 – 2019.

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“…Peng et al (2018) found a noteworthy spillover of crude-oil risk to Chinese firms. Yao et al (2018) noticed that the Chinese financial market presented a leading effect on crude-oil price from 2000 to 2004. Yin and Feng (2019) indicated that investor's attention to oil presents prediction ability of the US stock market returns.…”

Section: Literature Reviewmentioning

confidence: 99%

Transmission of shocks between Chinese financial market and oil market

Abdelhédi

Boujelbène-Abbes

2019

IJOEM

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Purpose The purpose of this paper is to empirically investigate the volatility spillover between the Chinese stock market, investor’s sentiment and oil market, specifically during the 2014‒2016 turmoil period. Design/methodology/approach This study used the daily and monthly China market price index, oil-price index and composite index of Chinese investor’s sentiment. The authors first use the DCC GARCH model in order to study the correlation between variables. Second, the authors use a continuous wavelet decomposition technique so as to capture both time- and frequency-varying features of co-movement variables. Finally, the authors examine the spillover effects by estimating the BEKK GARCH model. Findings The wavelet coherency results indicate a substantial co-movement between oil and Chinese stock markets in the periods of high volatility. BEKK GARCH model outcomes confirm this relation and report the noteworthy bidirectional transmission of volatility between oil market shocks and the Chinese investor’s sentiment, chiefly in the crisis period. These results support the behavioral theory of contagion and highlight that the Chinese investor’s sentiment is a channel through which shocks are transmitted between the oil and Chinese equity markets. Thus, these results are important for Chinese authorities that should monitor the investor’s sentiment to better control the interaction between financial and real markets. Originality/value This study makes three major contributions to the existing literature. First, it pays attention to the recent 2015 Chinese stock market bumble. Second, it has gone some way toward enhancing our understanding of the volatility spillover between the investor’s sentiment, investor’s sentiment variation, oil prices and stock market returns (variables of interest) during oil and stock market crises. Third, it uses the continuous wavelet decomposition technique since it reveals the linkage between variables of interest at different time horizons.

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The optimal thermal causal path analysis on the relationship between international crude oil price and stock market

Cited by 13 publications

References 27 publications

A dynamic relationship between crude oil price and Indian equity market: an empirical study with special reference to Indian benchmark index Sensex

A dynamic relationship between crude oil price and Indian equity market: an empirical study with special reference to Indian benchmark index Sensex

The Effect of Crude Oil Price on Merchandise Trade: Evidence from East Asia and Pacific

Transmission of shocks between Chinese financial market and oil market

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