Spillovers between oil and stock returns in the US energy sector: Does idiosyncratic information matter?
Dayong Zhang (),
Qiang Ji () and
Energy Economics, 2019, vol. 81, issue C, 536-544
This paper investigates the inter-connectedness between WTI oil price returns and the returns of listed firms in the US energy sector. Specifically, we focus on the issue of whether firm-level idiosyncratic information matters. A generalised dynamic factor model is used to separate common components from idiosyncratic components in these energy stocks. Systemic connectedness is then estimated following Diebold and Yilmaz (2014). Our empirical results demonstrate the important role of industrial-level common information in understanding the oil–stock relationship. A number of interesting points include: the US energy sector is the net contributor to WTI price changes, but the effect is mainly driven by industrial-level common information; the oil and gas industry dominates other industries in the energy sector; the dynamic analysis shows that although idiosyncratic information is mostly independent of oil shocks, individual energy stock returns do respond to WTI price movements.
Keywords: Connectedness; Energy sector; Generalised dynamic factor model; Idiosyncratic returns; Oil shocks (search for similar items in EconPapers)
JEL-codes: C58 G11 G12 O51 Q31 Q41 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (43) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:81:y:2019:i:c:p:536-544
Access Statistics for this article
Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant
More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().