Dynamic interdependence between crude oil and the automobile equities amid uncertainties

Patrick Kwashie Akorsu, Maxwell Kumordzie, Samuel Kwaku Agyei, John Kingsley Woode () and Audrey Foriwaa Adjei
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Patrick Kwashie Akorsu: University of Cape Coast
Maxwell Kumordzie: University of Cape Coast
Samuel Kwaku Agyei: University of Cape Coast
John Kingsley Woode: University of Cape Coast
Audrey Foriwaa Adjei: University of Cape Coast

Future Business Journal, 2025, vol. 11, issue 1, 1-19

Abstract: Abstract This current paper evaluates the variational dependence between West Texas Intermediate (WTI) crude oil and stock returns in the automotive sector, encompassing those operated in New York (Tesla, Toyota, Volkswagen, and Honda) and Shanghai (Chongqing, Build Your Dream [BYD], Jianghuai Automobile Company [JAC], and Shanghai Automotive Industry Corporation [SAIC]), utilising wavelet coherence analysis. The analysis employs daily datasets from January 2013 to December 2022. Findings from the wavelet coherence analysis reveal diverse and asymmetric correlations among the sample markets. Notably, crude oil price shocks exert a significantly adverse impact on automobile equities, particularly during monthly to quarterly intervals amid the global health crisis and the Russia–Ukraine conflict era, while weekly and annual intervals of the same period display varying levels of integration, albeit mostly weak to moderate. Prior to the global health crisis, crude oil price fluctuations positively influenced certain automobile equity markets, notably Honda, Toyota, and Volkswagen. Toyota and BYD returns acted as a refuge for WTI returns in the long run, while Tesla, Volkswagen, and JAC returns served as both hedge and safe haven assets over the same horizon. Moreover, the Shanghai Stock Exchange exhibits greater reactivity to shocks compared to the New York Stock Exchange, with crude oil driving automobile stocks across the observation period. Validation through Diks and Panchenko causality tests confirms these results, with minor exceptions. By elucidating the crude oil–equity interdependence across diverse timeframes, this inquiry furnishes noteworthy insights conducive to policy formulation, alongside substantiating evidence for the development of diversification strategies and the implementation of risk management protocols.

Keywords: WTI crude oil; Equity markets; Automotive industry; Interdependence; Global crisis (search for similar items in EconPapers)
JEL-codes: F2 F3 G1 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1186/s43093-025-00526-6

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