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Analysis of the international propagation of contagion between oil and stock markets

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  • Zhang, Guofu
  • Liu, Wei
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.

Suggested Citation

  • Zhang, Guofu & Liu, Wei, 2018. "Analysis of the international propagation of contagion between oil and stock markets," Energy, Elsevier, vol. 165(PA), pages 469-486.
    • Handle: RePEc:eee:energy:v:165:y:2018:i:pa:p:469-486
    DOI: 10.1016/j.energy.2018.09.024
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    More about this item

    Keywords

    Oil prices; Stock markets; Contagion; International propagation;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • P36 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Consumer Economics; Health; Education and Training; Welfare, Income, Wealth, and Poverty
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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