Extreme time–frequency connectedness between oil shocks and sectoral markets in the United States

Oguzhan Ozcelebi (), Jose Pérez-Montiel () and Sang Hoon Kang ()
Additional contact information
Oguzhan Ozcelebi: Istanbul University
Jose Pérez-Montiel: University of the Balearic Islands
Sang Hoon Kang: Pusan National University

Financial Innovation, 2025, vol. 11, issue 1, 1-31

Abstract: Abstract This study assessed the connectedness between oil shocks and industry stock indexes in the United States (US). We consider the normal and extreme conditions across different frequency horizons, and the quantile time–frequency connectedness method is used to determine the tail risk contagion under different frequency horizons. Our results reveal that the short-term frequency connectedness significantly exceeds the long-term frequency connectedness. We also indicate that the connectedness in the lower and upper quantiles is greater than at the conditional mean. Importantly, oil risk shock is the biggest net transmitter of shocks to the US sectors in normal and extreme conditions, highlighting that oil risk shocks cause substantial variations in US sector stock returns in the short, medium, and long term. Finally, QAR(3) model demonstrates the significant impact of oil risk shocks on US sector stock returns during extreme and normal conditions. Therefore, our study underscores the role of asymmetry in the reaction of US sector stock returns to oil-related shocks, and we suggest that policies aimed at overcoming the adverse effects of oil shocks on stock markets and promoting financial stability should incorporate asymmetric features.

Keywords: Oil shocks; Sector stock returns; Quantile connectedness; Quantile Granger causality; Quantile autoregressive model (search for similar items in EconPapers)
JEL-codes: E44 F31 F41 (search for similar items in EconPapers)
Date: 2025
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1186/s40854-025-00755-2 Abstract (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:fininn:v:11:y:2025:i:1:d:10.1186_s40854-025-00755-2

Ordering information: This journal article can be ordered from
http://www.springer. ... nomics/journal/40589

DOI: 10.1186/s40854-025-00755-2

Access Statistics for this article

Financial Innovation is currently edited by J. Leon Zhao and Zongyi

More articles in Financial Innovation from Springer, Southwestern University of Finance and Economics
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().