Analysis of the international propagation of contagion between oil and stock markets. (15th December 2018)

• Record Type: Journal Article
• Authors: Zhang, Guofu; Liu, Wei
• Is Part Of: Energy. Volume 165(2018)Part A
• Page Start: 469
• Page End: 486
• Publication Date: 2018-12-15
• Subjects: Oil prices -- Stock markets -- Contagion -- International propagation; C22 -- C58 -- P36 -- G11 -- Q41; Power resources -- Periodicals; Power (Mechanics) -- Periodicals; Energy consumption -- Periodicals; 333.7905
• DOI: 10.1016/j.energy.2018.09.024
• Languages: English
• ISSNs: 0360-5442

Abstract

Abstract: In this paper, we use time-varying copula and VAR-DAG models to investigate oil-stock contagion and its propagation among seven countries with different levels of economic development. Our results present evidence of positive lower tail dependence between oil and stock markets of the seven countries, which is indicative of contagion in the sense of Okimoto [1 ]. Evolution patterns of contagion are similar in the developed countries but different in the developing ones. Moreover, contagion is significantly affected by the 2008 financial crisis, and the contagious magnitude in China and India is considerably smaller than in the other five countries. The empirical evidence also suggests that oil-stock contagion is propagated from developed countries to developing ones, and Brazil is the most affected by the developed countries' contagion. Highlights: Time-varying copula and VAR-DAG models are developed and estimated. There exists a contagion between oil and seven stock markets. The oil-stock contagion is significantly affected by the 2008 financial crisis. The oil-stock contagion is propagated from developed countries to developing ones. The contagious magnitude in China and India is smaller than in the other five countries.