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Does the S&P500 index lead the crude oil dynamics? A complexity-based approach

Catherine Kyrtsou, Christina Mikropoulou and Angeliki Papana

Energy Economics, 2016, vol. 56, issue C, 239-246

Abstract: Taking the complex property of nonlinear feedback connectivity into consideration, the goal of this paper is to apprehend the interdependences between the financial and energy sectors. Our contribution is both theoretical and methodological. We conduct a multivariate analysis employing nonlinear tools, namely the Partial Transfer Entropy and the Asymmetric Mackey-Glass causality test. In particular, we build a system comprising the petroleum complex (crude oil, gasoline and heating oil), the S&P500 index and the 1-month futures-spot spread for crude oil. By adopting a rolling-window approach, we observe a persistent lead-lag relationship between the S&P500 index and the market participants' expectations for crude oil, from 2004 to 2009. Depending on the bubble period in the stock market, it appears that the resulting coupling becomes subject to the deterioration of global economic activity, induced by large common shocks.

Keywords: Nonlinear causality; S&P500; Petroleum complex; Futures-spot price spread; Speculation (search for similar items in EconPapers)
JEL-codes: C14 C32 E32 G10 Q40 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:56:y:2016:i:c:p:239-246

DOI: 10.1016/j.eneco.2016.02.001

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Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

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