 Shock transmission between crude oil prices and stock marketsAna Escribano, Monika W. Koczar, Francisco Jareño and Carlos Esparcia Resources Policy, 2023, vol. 83, issue C Abstract: This paper investigates the connectedness between crude oil prices and several financial stock markets from January 2000 to February 2023, applying a Dynamic Conditional Correlation Skew Student Copula model and the connectedness index by Diebold and Yilmaz (2012). The Kendall’s Tau correlation findings show that prior to the Global Finance Crisis, equity markets were less linked to BRENT than after the crisis, likely because of economic growth reducing the importance of oil prices. However, from late 2008 to 2023, global uncertainty due to various crises and conflicts led to greater correlation among oil prices and major equity indices. Importing countries showed negative pairwise dependence with BRENT more frequently than exporting countries, which can be attributed to their economic structure and dependence on oil. Thus, BRENT can serve as a hedge asset for equity investments in importing countries and just as a diversifier for exporting countries due to its weak negative correlation. Additionally, stock markets within oil-exporting countries, such as Norway (OSEAX) or Russia (RTS), are net receivers. The study concludes with a detailed analysis of connectedness in terms of the returns and volatility among crude oil prices and stock markets not only during different political and financial events but also in the aftermath of natural disasters that have affected the interdependencies between them. The results prove that the occurrences that influence the correlation between stock markets and BRENT do not have such a significant impact, but the spillover effect of these events dissolves at a leisurely pace. The findings of this study clearly show implications for various market participants, policymakers, and portfolio managers. Keywords: Crude oil prices; Stock markets; Connectedness; Equicorrelation; Copula; Information transmission; Financial shocks (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:jrpoli:v:83:y:2023:i:c:s0301420723004658 DOI: 10.1016/j.resourpol.2023.103754 Access Statistics for this article Resources Policy is currently edited by R. G. Eggert More articles in Resources Policy from Elsevier |
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