How Connected is the Oil-Bank Network? Firm-Level and High-Frequency Evidence

Yunhan Zhang, Qiang Ji (), David Gabauer and Rangan Gupta
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Yunhan Zhang: Institutes of Science and Development, Chinese Academy of Sciences, Beijing 100190, China; School of Public Policy and Management, University of Chinese Academy of Sciences, Beijing 100049, China
Qiang Ji: Institutes of Science and Development, Chinese Academy of Sciences, Beijing 100190, China; School of Public Policy and Management, University of Chinese Academy of Sciences, Beijing 100049, China

No 202405, Working Papers from University of Pretoria, Department of Economics

Abstract: By introducing a new generalized forecast error variance decomposition (GFEVD) approach that splits the same into its contemporaneous and lagged components, we investigate the risk spillover effects of different order moments, derived from intraday data, for the top 10 banks and top 10 oil and gas companies in the U.S., covering the period from December 29, 2017 to December 30, 2022. The study finds that, first, the dynamic total connectedness of all order moments is heterogeneous over time and economic events. Second, except realized volatility spillovers, the vast majority of overall spillovers are attributable to contemporaneous spillovers, while only a tiny fraction is associated with lagged spillovers. Finally, realized skewness (crash risk) and realized kurtosis (extreme events) in banks and oil and gas companies originate mainly from intra-industry rather than inter-industry transmission.

Keywords: Banking connectedness; TVP-VAR; higher moments; dynamic connectedness; GFEVD decomposition (search for similar items in EconPapers)
JEL-codes: C50 F65 G15 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2024-02
New Economics Papers: this item is included in nep-ban, nep-cna, nep-ene and nep-rmg
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Journal Article: How connected is the oil-bank network? Firm-level and high-frequency evidence (2024)
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