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Determinants of the Long-Term Correlation between Crude Oil and Stock Markets

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  • Lu Yang

    (School of Finance, Zhongnan University of Economics and Law, Wuhan 430073, China)

  • Lei Yang

    (School of Management, University of Science and Technology of China, Hefei 230026, China)

  • Kung-Cheng Ho

    (Pearl River Delta Collaborative Innovation Center of Scientific Finance and Industry, Guangdong University of Finance and Economics, Guangzhou 510320, China)

  • Shigeyuki Hamori

    (Graduate School of Economics, Kobe University, 2-1, Rokkodai, Nada-Ku, Kobe 657-8501, Japan)

Abstract

This study employed a dynamic conditional correlation–mixed-data sampling (DCC–MIDAS) approach and panel data analysis to examine the factors that influence the long-term correlation between crude oil and stock markets. Our study shows that there is a positive long-term conditional correlation between oil prices and stock markets, except during the 2008 global financial crisis and the 2011 European debt crisis. We also found that macroeconomic factors have a significant impact on this correlation. Specifically, risk-free rate has a positive effect, whereas economic activity and credit risk has a negative effect. Our results provide useful information for investors and monetary authorities.

Suggested Citation

  • Lu Yang & Lei Yang & Kung-Cheng Ho & Shigeyuki Hamori, 2019. "Determinants of the Long-Term Correlation between Crude Oil and Stock Markets," Energies, MDPI, vol. 12(21), pages 1-15, October.
    • Handle: RePEc:gam:jeners:v:12:y:2019:i:21:p:4123-:d:281377
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