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The Dynamic Time-frequency Relationship between International Oil Prices and Investor Sentiment in China: A Wavelet Coherence Analysis

Zhengke Ye, Chunyan Hu, Linjie He, Guangda Ouyang and Fenghua Wen

The Energy Journal, 2020, vol. 41, issue 5, 251-270

Abstract: We take a fresh look at the interaction between crude oil prices and investor sentiment from the novel perspective of both the time and the frequency domains. By using principal component analysis, we first construct an investor sentiment indicator. Then, crude oil prices are decomposed into three oil price shocks through an SVAR model. Lastly, the dynamic relationship between investor sentiment and oil price shocks is comprehensively studied from both the time and the frequency domains via wavelet coherence analysis. Our results show the leading position of crude oil prices in the co-movement relationship with investor sentiment. Further, we distinguish the different effects of oil price shocks on investor sentiment at different times and frequencies. We also find that the patterns of the co-movement between oil prices (oil price shocks) and investor sentiment change not only with time but also with frequency.

Keywords: Investor sentiment; International oil prices; Wavelet coherence analysis; Co-movement (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:enejou:v:41:y:2020:i:5:p:251-270

DOI: 10.5547/01956574.41.5.fwen

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