Stock-oil comovements through fear, uncertainty, and expectations: Evidence from conditional comoments

Mohammad Noori

International Review of Economics & Finance, 2024, vol. 93, issue PA, 529-551

Abstract: This paper investigates the role of sentiment as a potential driver of the novel stock-oil (represented by the S&P 500 and West Texas Intermediate futures) dynamics in the aftermath of the 2008 global financial crisis (GFC). We study the impact of both sentiment shocks and fluctuations, on the stock-oil time-varying conditional comoments, using the time-varying parameter vector autoregression (TVP-VAR), and the nonlinear autoregressive distributed lag (NARDL), respectively. The findings show that the increasing (asymmetric) effect of sentiments, accounts for the novel post-GFC stock-oil dynamics. As a result, a proactive regulatory framework is needed to shield oil futures against the ever-increasing speculation and financialization.

Keywords: Financial markets; Volatility modeling; Conditional comoments; Sentiment; Financial crises (search for similar items in EconPapers)
JEL-codes: C32 E32 E44 G1 Q41 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:93:y:2024:i:pa:p:529-551

DOI: 10.1016/j.iref.2024.03.047

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