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Asymmetric volatility spillovers between crude oil and international financial markets

Xunxiao Wang and Chongfeng Wu

Energy Economics, 2018, vol. 74, issue C, 592-604

Abstract: In this paper, we examine asymmetric volatility spillovers between oil and international stock markets in a vector autoregression framework using a directed acyclic graph (DAG) technique. We provide evidence that bad total volatility spillovers dominate the system and change over time, suggesting that a pessimistic mood and uninformed traders who tend to increase volatility dominate in markets. Positive spillovers of oil markets dominated from 2006 to mid-2009, but reversed after mid-2009. Moreover, the spillovers from good volatilities in oil markets to bad volatilities in global stock markets were significantly positive during the economic recovery period. The recent, important economic and political events have influenced asymmetries in volatility spillovers.

Keywords: Volatility spillover; Asymmetry; Oil market; Stock market; VAR (search for similar items in EconPapers)
Date: 2018
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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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