Recent hikes in oil-equity market correlations: Transitory or permanent?Bing Zhang and Xiao-Ming Li Energy Economics, 2016, vol. 53, issue C, 305-315 Abstract: This paper empirically examines the long-run behavior of eight oil-equity correlations based on the ADCC (asymmetric dynamic conditional correlation) model and a novel decomposing approach. We select equity price indexes from three developed countries (the US, the UK and Germany) and five BRICS member countries (Brazil, Russia, India, China and South Africa) and consider ten economic/financial events for investigation. Seven correlations exhibit a positively sloped trend, and one exhibits a horizontal trend. All of these trends have undergone one or two structural breaks, which moved the corresponding correlations to their highest-ever evolutionary paths. These structural breaks are associated with one or more of the ten episodes considered, and a common event impacting all eight of the correlation trends is detected to be the 2008 adverse oil shock. The broken trends explain why the correlations were low in the early years and high in the recent years. Our findings indicate that recent hikes in the oil-equity correlations are a long-run phenomenon. Keywords: Oil; Equity; Conditional correlations; Structural break (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:53:y:2016:i:c:p:305-315 DOI: 10.1016/j.eneco.2014.03.011 Access Statistics for this article Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant More articles in Energy Economics from Elsevier |
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