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Oil shocks and stock markets revisited: Measuring connectedness from a global perspective

Dayong Zhang ()

Energy Economics, 2017, vol. 62, issue C, 323-333

Abstract: This paper contributes to the large volume of empirical studies on the relationship between oil shocks and stock markets from a new systemic perspective. The method of measuring connectedness proposed by Diebold and Yilmaz (2009, 2012, 2014) is adopted to study the relationship between oil shocks and returns at six major stock markets around the world. It is shown that the contribution of oil shocks to the world financial system is limited. Oil price changes, however, can be explained by information on the financial system. Furthermore, a rolling windows analysis finds that oil shocks can occasionally contribute significantly to stock markets, and it is also proved that only large shocks matter.

Keywords: Connectedness; Granger causality; Oil shocks; Stock markets; Variance decomposition (search for similar items in EconPapers)
JEL-codes: G12 G15 (search for similar items in EconPapers)
Date: 2017
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Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

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