Extreme quantile connectedness and spillovers between oil and Vietnamese stock markets: a sectoral analysis

Walid Mensi, Salem Adel Ziadat, Xuan Vinh Vo and Sang Hoon Kang

International Journal of Emerging Markets, 2022, vol. 19, issue 6, 1586-1625

Abstract: Purpose - This study examines the extreme quantile connectedness and spillovers between West Texas Intermediate (WTI) crude oil futures and ten Vietnamese stock market sectors. Knowledge of such links is important to both investors and policymakers in understanding the transmission of shocks across markets. Design/methodology/approach - The authors employ the extreme quantile connectedness methodology of Andoet al.(2022). Findings - Initial results show that the size of spillovers is higher during bearish markets than bullish markets and under major financial, political, energy and pandemic events. The oil market is a net receiver of spillovers during downward markets and net contributors during upward markets. The banking sector is a net contributor of spillovers, whereas consumer discretionary and consumer staples are net receivers for different quantiles. The role of the remaining sectors as net receivers/contributors is sensitive to the quantiles. Oil has a large spillover effect on the electricity sector for all quantiles. Comparing all crises, oil offers the best hedging effectiveness to the Vietnamese sector during the coronavirus disease 2019 (COVID-19) crisis. Moreover, oil was a cheap hedge asset during oil crises. Finally, oil provides the highest hedging effectiveness for healthcare during the global financial crisis (GFC) and consumer staples during the European debt crisis (EDC), oil crisis and COVID-19. Originality/value - Acknowledging the presence of heterogeneity in the relation between oil and economic sectors under different market conditions, this study is the first to examine the extreme quantile connectedness between oil and Vietnamese sectors.

Keywords: Oil; Vietnamese stock sectors; Quantile spillovers; Crises; Hedging (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijoemp:ijoem-03-2022-0513

DOI: 10.1108/IJOEM-03-2022-0513

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