 Financial uncertainty shocks and systemic risk: Revealing the risk spillover from the oil market to the stock marketYongjian Lyu, Heling Yi, Mo Yang, Yihan Zou, Ding Li and Zhilong Qin Applied Energy, 2025, vol. 382, issue C, No S0306261925000418 Abstract: Financial uncertainty shocks are emerging as potential drivers for the spillovers of risk originating from the oil market into the stock market, with the increasing financialization of the oil market. This paper explores this phenomenon and provides compelling findings. First, the oil market generates substantial risk spillovers to the stock market, reaching a peak amid the COVID-19 crisis. Second, according to the backtesting results, the ΔCoVaR values derived from the Student-t Copula model reflect the true level of such risk spillovers. Third, shocks to financial uncertainty increase systemic risk by causing risk to spill over from the oil to the stock market, with larger spillovers occurring during periods of increased economic vulnerability. Finally, financial uncertainty shocks are the fundamental drivers of variance changes in risk spillovers, making a greater contribution than macroeconomic uncertainty shocks, according to the time-varying forecast error variance decomposition. Keywords: Backtesting; Risk spillovers; Crude oil market; Financial uncertainty (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:appene:v:382:y:2025:i:c:s0306261925000418 Ordering information: This journal article can be ordered from DOI: 10.1016/j.apenergy.2025.125311 Access Statistics for this article Applied Energy is currently edited by J. Yan More articles in Applied Energy from Elsevier |
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