Symmetric and Asymmetric Causal Relationship between Oil Prices and G7 Stock Markets: A Bootstrap Rolling-Window Granger Causality Test

Khaled Mokni (), Mohamed Sahbi Nakhli (), Othman Mnari () and Khemaies Bougatef ()
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Mohamed Sahbi Nakhli: Northern Border University, Saudi Arabia/ University of Kairouan, Tunisia/ University of Sousse, Tunisia, Postal: University of Kairouan, Tunisia / LaREMFIQ Laboratory, University of Sousse,, Tunisia.
Othman Mnari: University of Kairouan, Tunisia / University of Sousse, Tunisia, Postal: University of Kairouan, Tunisia /LaREMFIQ Laboratory, University of Sousse,, Tunisia.
Khemaies Bougatef: University of Kairouan, Tunisia, Postal: University of Kairouan, Tunisia.

Journal of Economic Integration, 2021, vol. 36, issue 4, 718-744

Abstract: This study examines the causal relationships between oil prices and the MSCI stock index of G7 countries between September 2004 and October 2020. This study is novel in implementing symmetric and asymmetric time-varying causality tests based on the bootstrap rolling-window approach. The results reveal that the causal link between oil prices and G7 stock markets is time-dependent. The periods of bidirectional causality roughly coincide with the global financial crisis and the ongoing COVID-19 pandemic. When asymmetry is accounted for, the results suggest an asymmetric causality between the two markets expressed by different patterns regarding positive and negative oil shocks. The results also indicate symmetric causality during the COVID-19 pandemic. These findings have implications for portfolio design and hedging strategies that are important to both policymakers and investors.

Keywords: oil price; stock market; G7 country; time-varying causality; asymmetry (search for similar items in EconPapers)
JEL-codes: G10 Q43 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ris:integr:0841

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