 Volatility transmission between oil prices and banks' stock prices as a new source of instability: Lessons from the United States experienceYao Axel Ehouman Economic Modelling, 2020, vol. 91, issue C, 198-217 Abstract: This paper examines whether American banks' exposure to the oil industry could lead to instability in both oil and financial markets. To address this issue, we investigate volatility spillovers between oil prices and the stock prices of the four major American banks involved in the oil industry by employing the vector autoregressive fractionally integrated moving average framework. We use high-frequency data from January 3, 2006, to June 30, 2016. Our results support the existence of such volatility spillovers, as evidenced by the significant volatility responses of oil price (banks' stock price) to a shock in banks' stock price (oil price). These responses, more pronounced following the banks' exposure to the shale industry, mainly reflect the financial fragility of shale companies and their high indebtedness levels. Thus, this paper emphasises how the shale oil industry could trigger turmoil in both oil and financial markets. Keywords: Banks' stocks; Oil prices; Volatility spillovers (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:ecmode:v:91:y:2020:i:c:p:198-217 DOI: 10.1016/j.econmod.2020.06.009 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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