Are the shocks of EPU, VIX, and GPR indexes on the oil-stock nexus alike? A time-frequency analysis

Xiuwen Chen

Applied Economics, 2023, vol. 55, issue 48, 5637-5652

Abstract: This paper distinguishes whether the shocks of various uncertainties on oil-stock correlation are alike from a time-frequency perspective. Specifically, using data from December 1997 to April 2021, the effects of EPU, VIX, and GPR on the interaction between Brent oil prices and stock indices in the G7 and BRIC countries are examined. The results reveal that the influence of EPU, VIX, and GPR on the oil-stock co-movement is dependent upon investment horizons. In developed markets, the most influential uncertainty index is the VIX, followed by EPU and GPR. In emerging markets, the interactions between oil prices and stock indices in Brazil and India are more susceptible to the VIX, followed by GPR and EPU. For China, the co-movement relation is more sensitive to EPU. Moreover, better prediction power on the stock market is obtained by combining oil prices and EPU or VIX. Our findings provide a crucial reference for financial risk management.

Date: 2023
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DOI: 10.1080/00036846.2022.2140115

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