Interdependence between oil and East Asian stock markets: Evidence from wavelet coherence analysis
Xiao Jing Cai,
Nannan Yuan and
Shigeyuki Hamori ()
Journal of International Financial Markets, Institutions and Money, 2017, vol. 48, issue C, 206-223
This paper examines the interdependence and causality relationship between oil and East Asian stock returns from 1992 to 2015 and provides a fresh perspective on portfolio diversification benefits using wavelet coherence analysis. We find that oil prices and the East Asian stock market move in phase, and oil prices lead to stock returns in the long run. We provide evidence that oil can reduce the risk in the short run, and the degree of risk reduction of oil-stock portfolios decreases over the long term. This study provides information that can guide investors in diversification efforts while investing in oil and East Asian stock markets.
Keywords: Wavelet coherence analysis; East Asian stock markets; Portfolio diversification; Price interdependence; Oil-stock interdependence (search for similar items in EconPapers)
JEL-codes: G15 G15 G11 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:48:y:2017:i:c:p:206-223
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