A Study on Unobserved Structural Innovations of Oil Price: Evidence from Global Stock, Bond, Foreign Exchange, and Energy Markets

Jungho Baek and Ji-Yong Seo ()
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Ji-Yong Seo: Department of Business Administration, College of Business, Sangmyung University, 20, Hongjimun 2-gil, Jongno-gu, Seoul, Korea

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2015, vol. 18, issue 01, 1-17

Abstract: This study examines the effects of oil shocks by their respective causes and of volatility spillover including leverage effects. Previous studies did not analyze oil factor by categorizing it into three components (supply shock, demand shock, and market shock) as determinants of rate of return in stock markets, a key issue in finance. Results show that oil shocks determine returns in the global stock market, bond market, foreign exchange market, and energy market, and that their effects vary by types of markets, levels of oil prices, and types of oil shocks. Second, the leverage effect of oil shocks and the spillover effect of volatility in demand shock and market shock are mostly statistically significant during periods characterized by high oil prices.

Keywords: Leverage effects; supply shock; demand shock; market shock; spillover effect of volatility; G12; G14 (search for similar items in EconPapers)
JEL-codes: G1 G2 G3 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (10)

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DOI: 10.1142/S0219091515500046

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