The directional volatility connectedness between crude oil and equity markets: New evidence from implied volatility indexes

Maghyereh, Aktham; Awartani, Basel; Bouri, Elie

doi:10.1016/j.eneco.2016.04.010

Cited by 364 publications

(160 citation statements)

References 73 publications

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“…Other studies that also concentrate on oil-exporting and oil-importing countries are those by Boldanov et al (2016) and Maghyereh et al (2016). Maghyereh et al (2016) use a sample of 11 countries (3 oil-exporters and 8 oilimporters) for the period 2008-2015, and find evidence that oil price volatility is the main transmitter of volatility shocks to stock market volatilities, a finding similar to Awartani and Maghyereh (2013).…”

Section: Time-varying Relationship Between Oil and Stock Market Volatmentioning

confidence: 98%

Oil Prices and Stock Markets: A Review of the Theory and Empirical Evidence

Degiannakis¹,

Filis²,

Arora³

2018

The Energy Journal

214

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Do oil prices and stock markets move in tandem or in opposite directions? The complex and time varying relationship between oil prices and stock markets has caught the attention of the financial press, investors, policymakers, researchers, and the general public in recent years. In light of such attention, this paper reviews research on the oil price and stock market relationship. The majority of papers we survey study the impacts of oil markets on stock markets, whereas, little research in the reverse direction exists. Our review finds that the causal effects between oil and stock markets depend heavily on whether research is performed using aggregate stock market indices, sectorial indices, or firm-level data and whether stock markets operate in net oil-importing or net oil-exporting countries. Additionally, conclusions vary depending on whether studies use symmetric or asymmetric changes in the price of oil, or whether they focus on unexpected changes in oil prices. Finally, we find that most studies show oil price volatility transmits to stock market volatility, and that including measures of stock market performance improves forecasts of oil prices and oil price volatility. Several important avenues for further research are identified.

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Section: Time-varying Relationship Between Oil and Stock Market Volatmentioning

confidence: 98%

Oil Prices and Stock Markets: A Review of the Theory and Empirical Evidence

Degiannakis¹,

Filis²,

Arora³

2018

The Energy Journal

214

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“…The asymmetry measure is significantly higher during the pre-2008 crisis period than afterwards. Lastly, Maghyereh et al (2016) present a study of connectedness between oil and equity markets. Using implied volatility as a proxy for the latent volatility process, they find that the flow of connectedness from the oil to the equity market strongly dominates the other direction.…”

Section: Literature Reviewmentioning

confidence: 99%

Cyclical properties of supply-side and demand-side shocks in oil-based commodity markets

Křehlík

Baruník

2017

Energy Economics

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Oil markets profoundly influence world economies through determination of prices of energy and transports. Using novel methodology devised in frequency domain, we study the information transmission mechanisms in oil-based commodity markets. Taking crude oil as a supply-side benchmark and heating oil and gasoline as demand-side benchmarks, we document new stylized facts about cyclical properties of the transmission mechanism generated by volatility shocks with heterogeneous frequency responses. Our first key finding is that shocks to volatility with response shorter than one week are increasingly important to the transmission mechanism over the studied period. Second, demand-side shocks to volatility are becoming increasingly important in creating short-run connectedness. Third, the supply-side shocks to volatility resonating in both the long run and short run are important sources of connectedness.

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“…The significance of the OVX has been extensively discussed in earlier studies. 12,13 According to these prior research works, the OVX reveals more information than does the historical oil price series. The OVX contains both historical volatility information and investors' expectation of future market conditions and thus appears to be a superior measure of oil price volatility.…”

Section: Methodsmentioning

confidence: 99%

“…Second, while the previous studies observing the connection between ethanol and oil markets have used the traditional oil price series, this paper utilizes the information content of the crude oil volatility index (OVX) as the indicator of oil price uncertainty. The significance of the OVX has been extensively discussed in earlier studies . According to these prior research works, the OVX reveals more information than does the historical oil price series.…”

Section: Introductionmentioning

confidence: 99%

Asymmetric impact of oil market uncertainty on the US biofuel industry

Dutta

2018

Biofuels Bioprod Bioref

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Literature has shown that crude oil prices have a significant impact on the global biofuel industry. However, previous researchers have investigated the link between fossil fuel and biofuel employing a linear framework, although energy price indexes are often nonlinear and asymmetric in nature. The present study examines whether the effect of oil‐price uncertainty on US ethanol market volatility is asymmetric. This work differs from earlier studies in that, unlike the existing literature, it considers the information content of the crude oil volatility index (OVX) as the indicator of oil market uncertainty. Methodologically, an extended EGARCH process has been employed to examine the asymmetric linkage. The findings suggest that the crude oil market creates volatility in the US ethanol industry. More specifically, ethanol volatility is negatively affected by oil volatility implying that an increase in oil volatility results in a decrease in ethanol volatility. The results also show that the impact of oil market uncertainty on the US ethanol industry is asymmetric indicating that the biofuel prices react differently to the rise and fall in crude oil volatility index. The findings further suggest that including OVX in the EGARCH process improves the volatility forecasts of the US ethanol price index. © 2018 Society of Chemical Industry and John Wiley & Sons, Ltd

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The directional volatility connectedness between crude oil and equity markets: New evidence from implied volatility indexes

Cited by 364 publications

References 73 publications

Oil Prices and Stock Markets: A Review of the Theory and Empirical Evidence

Oil Prices and Stock Markets: A Review of the Theory and Empirical Evidence

Cyclical properties of supply-side and demand-side shocks in oil-based commodity markets

Asymmetric impact of oil market uncertainty on the US biofuel industry

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