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Does the S&P500 index lead the crude oil dynamics? A complexity-based approach

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  • Kyrtsou, Catherine
  • Mikropoulou, Christina
  • Papana, Angeliki

Abstract

Taking the complex property of nonlinear feedback connectivity into consideration, the goal of this paper is to apprehend the interdependences between the financial and energy sectors. Our contribution is both theoretical and methodological. We conduct a multivariate analysis employing nonlinear tools, namely the Partial Transfer Entropy and the Asymmetric Mackey-Glass causality test. In particular, we build a system comprising the petroleum complex (crude oil, gasoline and heating oil), the S&P500 index and the 1-month futures-spot spread for crude oil. By adopting a rolling-window approach, we observe a persistent lead-lag relationship between the S&P500 index and the market participants' expectations for crude oil, from 2004 to 2009. Depending on the bubble period in the stock market, it appears that the resulting coupling becomes subject to the deterioration of global economic activity, induced by large common shocks.

Suggested Citation

  • Kyrtsou, Catherine & Mikropoulou, Christina & Papana, Angeliki, 2016. "Does the S&P500 index lead the crude oil dynamics? A complexity-based approach," Energy Economics, Elsevier, vol. 56(C), pages 239-246.
  • Handle: RePEc:eee:eneeco:v:56:y:2016:i:c:p:239-246
    DOI: 10.1016/j.eneco.2016.02.001
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    Cited by:

    1. repec:eee:eneeco:v:66:y:2017:i:c:p:559-570 is not listed on IDEAS
    2. KANAMURA Takashi, 2018. "Diversification Effect of Commodity Futures on Financial Markets," Discussion papers 18019, Research Institute of Economy, Trade and Industry (RIETI).
    3. repec:eee:enepol:v:116:y:2018:i:c:p:127-136 is not listed on IDEAS

    More about this item

    Keywords

    Nonlinear causality; S&P500; Petroleum complex; Futures-spot price spread; Speculation;

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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