Determinants of the Long-Term Correlation between Crude Oil and Stock Markets

Lu Yang, Lei Yang, Kung-Cheng Ho and Shigeyuki Hamori
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Lei Yang: School of Management, University of Science and Technology of China, Hefei 230026, China
Kung-Cheng Ho: Pearl River Delta Collaborative Innovation Center of Scientific Finance and Industry, Guangdong University of Finance and Economics, Guangzhou 510320, China

Energies, 2019, vol. 12, issue 21, 1-15

Abstract: This study employed a dynamic conditional correlation–mixed-data sampling (DCC–MIDAS) approach and panel data analysis to examine the factors that influence the long-term correlation between crude oil and stock markets. Our study shows that there is a positive long-term conditional correlation between oil prices and stock markets, except during the 2008 global financial crisis and the 2011 European debt crisis. We also found that macroeconomic factors have a significant impact on this correlation. Specifically, risk-free rate has a positive effect, whereas economic activity and credit risk has a negative effect. Our results provide useful information for investors and monetary authorities.

Keywords: oil price; stock market; GARCH–MIDAS; DCC–MIDAS (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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