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How Connected is the Oil-Bank Network? Firm-Level and High-Frequency Evidence

Author

Listed:
  • Yunhan Zhang

    (Institutes of Science and Development, Chinese Academy of Sciences, Beijing 100190, China; School of Public Policy and Management, University of Chinese Academy of Sciences, Beijing 100049, China)

  • Qiang Ji

    (Institutes of Science and Development, Chinese Academy of Sciences, Beijing 100190, China; School of Public Policy and Management, University of Chinese Academy of Sciences, Beijing 100049, China)

  • David Gabauer

    (Academy of Data Science in Finance, Vienna, Austria; Institute of Corporate Finance, Johannes Kepler University, Linz, Austria)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa)

Abstract

By introducing a new generalized forecast error variance decomposition (GFEVD) approach that splits the same into its contemporaneous and lagged components, we investigate the risk spillover effects of different order moments, derived from intraday data, for the top 10 banks and top 10 oil and gas companies in the U.S., covering the period from December 29, 2017 to December 30, 2022. The study finds that, first, the dynamic total connectedness of all order moments is heterogeneous over time and economic events. Second, except realized volatility spillovers, the vast majority of overall spillovers are attributable to contemporaneous spillovers, while only a tiny fraction is associated with lagged spillovers. Finally, realized skewness (crash risk) and realized kurtosis (extreme events) in banks and oil and gas companies originate mainly from intra-industry rather than inter-industry transmission.

Suggested Citation

  • Yunhan Zhang & Qiang Ji & David Gabauer & Rangan Gupta, 2024. "How Connected is the Oil-Bank Network? Firm-Level and High-Frequency Evidence," Working Papers 202405, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:202405
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    References listed on IDEAS

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    More about this item

    Keywords

    Banking connectedness; TVP-VAR; higher moments; dynamic connectedness; GFEVD decomposition;
    All these keywords.

    JEL classification:

    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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