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Oil shocks and stock markets revisited: Measuring connectedness from a global perspective

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  • Zhang, Dayong

Abstract

This paper contributes to the large volume of empirical studies on the relationship between oil shocks and stock markets from a new systemic perspective. The method of measuring connectedness proposed by Diebold and Yilmaz (2009, 2012, 2014) is adopted to study the relationship between oil shocks and returns at six major stock markets around the world. It is shown that the contribution of oil shocks to the world financial system is limited. Oil price changes, however, can be explained by information on the financial system. Furthermore, a rolling windows analysis finds that oil shocks can occasionally contribute significantly to stock markets, and it is also proved that only large shocks matter.

Suggested Citation

  • Zhang, Dayong, 2017. "Oil shocks and stock markets revisited: Measuring connectedness from a global perspective," Energy Economics, Elsevier, vol. 62(C), pages 323-333.
    • Handle: RePEc:eee:eneeco:v:62:y:2017:i:c:p:323-333
    DOI: 10.1016/j.eneco.2017.01.009
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    More about this item

    Keywords

    Connectedness; Granger causality; Oil shocks; Stock markets; Variance decomposition;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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