Relationship between the oil price volatility and sectoral stock markets in oil-exporting economies: Evidence from wavelet nonlinear denoised based quantile and Granger-causality analysis

Hamdi, Besma; Aloui, Mouna; Alqahtani, Faisal; Tiwari, Aviral Kumar

doi:10.1016/j.eneco.2018.12.021

Cited by 137 publications

(53 citation statements)

References 63 publications

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“…On the issue of spillover, there has been a high evidence of the presence of spillovers between oil and stock markets. Different studies analyze the spillovers between these markets while noting the level of stock aggregation (see Basher et al, 2018 ; Zhang, 2017 ; Maghyereh et al, 2016 ; Phan et al, 2016 ., 2016, Bouri, 2015 for aggregate stock market level; Narayan and Sharma, 2011 ; Tiwari et al, 2018 ; Hamdi et al, 2019 ; Arouri et al, 2012 ; Fang and Egan, 2018 for sectoral/industrial stock level; Antonakakis et al, 2018 ; Peng et al, 2018 ; Broadstock et al, 2016 for firm level). For instance, through the use of the generalized VAR-GARCH model, Arouri et al (2011b) note the existence of return and volatility spillovers between oil and stock markets in the Gulf Cooperation Council (GCC) countries.…”

Section: Literature Reviewmentioning

confidence: 99%

How COVID-19 drives connectedness among commodity and financial markets: Evidence from TVP-VAR and causality-in-quantiles techniques

2021

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With many commodity and financial markets reportedly experiencing poor performances during this COVID-19 pandemic, this study intends to examine the effect of the pandemic on the connectedness among the markets. There are several reasons that suggest that apart from the pandemic affecting the performances of the markets, it can also be a driver of their connectedness, coming from the perspective of the global financial cycle channel. Therefore, we first employ the recently developed time-varying parameter vector autoregressions (TVP-VAR) technique to examine the volatility spillover among the commodity and financial assets. We find evidence of strong volatility across the markets, with gold and USD being net receivers of shocks, and others, net transmitters. With this evidence, we proceed to the evaluation of the influence of the COVID-19 pandemic on the connectedness across the markets using both the linear and non-linear (causality-in-quantiles) causality tests. The causality-in-quantiles test outperforms the linear Granger-causality test, and the results show significant causal impacts of the two measures of COVID-19 pandemic (infectious diseases-based equity market volatility and the growth rate of the U.S. COVID-19 reported cases) on the connectedness across the markets, especially at the lower and middle-level quantiles. Overall, these findings prove that the pandemic has been largely responsible for risks transmission across various commodity and financial markets. This is because it has significantly raised investors’ and policy uncertainties and immensely altered global financial cycle which in turn results in global flows of capital, and movements in the prices of assets across different financial markets.

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Section: Literature Reviewmentioning

confidence: 99%

How COVID-19 drives connectedness among commodity and financial markets: Evidence from TVP-VAR and causality-in-quantiles techniques

2021

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“…Commodities have become increasingly important over the last decade in financial markets. Among them, oil has received more attention because it has a weight of 50% in the general commodity index [26]. Oil has economic significance for three reasons.…”

Section: Literature Reviewmentioning

confidence: 99%

“…USO holds the near-month WTI futures and tracks their daily price changes in US dollars. WTI futures are the most liquid energy futures contracts, with an average daily volume of nearly 1.1 million to 2 million contracts written [10,26]. WTI refers to oil extracted from wells in the U.S. and sent via pipeline to Cushing, Oklahoma.…”

Section: Oil Etf and Energy Mutual Fundmentioning

confidence: 99%

Volatility Transmission from Equity, Bulk Shipping, and Commodity Markets to Oil ETF and Energy Fund—A GARCH-MIDAS Model

Lin

Chang

2020

Mathematics

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Oil continues to be a major source of world energy, but oil prices and funds have experienced high volatility over the last decade. This study applies the generalized autoregressive conditional heteroskedasticity-mixed-data sampling (GARCH-MIDAS) model on data spanning 1 July 2014 to 30 April 2020 to examine volatility transmission from the equity, bulk shipping, commodity, currency, and crude oil markets to the United States Oil Fund (USO) and BlackRock World Energy Fund A2 (BGF). By dividing the sample into two subsamples, we find a significant volatility transmission from the equity market to the oil ETF and energy fund both before and after the 2018 U.S.–China trade war. The volatility transmission from the bulk shipping, commodity, and crude oil markets turns significant for the oil ETF and energy fund after the 2018 U.S.–China trade war, extending into the COVID-19 pandemic in early 2020. The results suggest that investors can use the equity market to predict the movement of oil and energy funds during both tranquil and turmoil periods. Moreover, investors can use bulk shipping, commodity, and crude oil markets in addition to the equity market to forecast oil and energy funds’ volatility during the turmoil periods. This paper benefits investors against the high volatility of the energy funds.

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“…By exploring Asian industries, Thorbecke [6] revealed that construction, airlines, and trucking are affected by greater oil prices, while the oil and gas production sector, the petrochemical sector, and the precious metals sector benefit from oil price rises. In the context of Gulf Cooperation Council (GCC) countries, Hamdi et al [7] reported that oil price volatility positively influences the energy, industrial, financial, and basic materials sectors in a high market, although throughout oil price instability, the banking, oil/gas, and transportation sectors negatively react to oil price unpredictability in a high market. Furthermore, insurance, minerals, utilities, and telecommunications were unaffected by oil price volatility in a high market.…”

Section: Introductionmentioning

confidence: 99%

“…The energy market can undoubtedly be a driver of economic growth and job creation in a developing country, such as Romania. Previous examinations were undertaken for African stock markets [20,23], Asian countries [6,14,15,[24][25][26][27][28], European nations [18,29], the US stock market [1,16,[30][31][32], Egypt [33], Gulf states [7,34,35], India [36], Islamic stocks [19], Lebanon [37], Mexico [38,39], and Turkey [40,41]. To the best of our knowledge, this is the first investigation to examine the linkage between the energy market and the Romanian stock market.…”

Section: Introductionmentioning

confidence: 99%

On the Linkage between the Energy Market and Stock Returns: Evidence from Romania

2019

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his paper aims to establish whether the Romanian energy market has an influence on the good running of the associated capital market. In order to achieve this objective, we approached a series of econometric techniques that allowed us to study the cointegration between variables, the presence of short-term or long-term causality relationships, and the application of impulse-response functions to analyze how the BET index responds to the shocks applied. The empirical findings from the Johansen cointegration test, ARDL model, and VAR/VECM models confirmed both the presence of a long-term and short-term relationship between the energy market and capital market. From all energy market indicators, only hard coal presented a causal relationship with the BET index. We also noticed a unidirectional relationship from the WTI crude oil to the Romanian capital market. Our findings should be of interest to researchers, regulators, and market participants.

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Relationship between the oil price volatility and sectoral stock markets in oil-exporting economies: Evidence from wavelet nonlinear denoised based quantile and Granger-causality analysis

Cited by 137 publications

References 63 publications

How COVID-19 drives connectedness among commodity and financial markets: Evidence from TVP-VAR and causality-in-quantiles techniques

How COVID-19 drives connectedness among commodity and financial markets: Evidence from TVP-VAR and causality-in-quantiles techniques

Volatility Transmission from Equity, Bulk Shipping, and Commodity Markets to Oil ETF and Energy Fund—A GARCH-MIDAS Model

On the Linkage between the Energy Market and Stock Returns: Evidence from Romania

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