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Mean spillover effect between crude oil and gasoline markets: an empirical result

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  • Zhi-Hong Han
  • Sheng Yang
  • Mu-Ling Chen
  • Ling-Yun He

Abstract

In this paper, we investigate the mean spillover effect between crude oil and gasoline prices in both spot and future markets before and after the 2008 financial crisis. To do this, we first conduct co-integration and Granger causality tests to examine the long-term equilibrium and causality between crude oil and gasoline prices in both spot and future markets. Then we apply VEC model, impulse response, and variance decomposition to analyse the short-term adjustment and the interactive influence between the markets. Using a Markov regime-switching model, we find both crude oil and gasoline markets fluctuate more intensely after the financial crisis, and thereby verify that the financial crisis has influence on the markets. Specifically, the mean spillover effect becomes more intense after the crisis. Before the crisis, there is no causality between the two markets, while after that, causality appears in the markets.

Suggested Citation

  • Zhi-Hong Han & Sheng Yang & Mu-Ling Chen & Ling-Yun He, 2015. "Mean spillover effect between crude oil and gasoline markets: an empirical result," International Journal of Global Energy Issues, Inderscience Enterprises Ltd, vol. 38(1/2/3), pages 49-68.
    • Handle: RePEc:ids:ijgeni:v:38:y:2015:i:1/2/3:p:49-68
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    Cited by:

    1. Jian, Zhihong & Wu, Shuai & Zhu, Zhican, 2018. "Asymmetric extreme risk spillovers between the Chinese stock market and index futures market: An MV-CAViaR based intraday CoVaR approach," Emerging Markets Review, Elsevier, vol. 37(C), pages 98-113.
    2. Di Sanzo, Silvestro, 2018. "A Markov switching long memory model of crude oil price return volatility," Energy Economics, Elsevier, vol. 74(C), pages 351-359.
    3. Bouri, Elie & Lei, Xiaojie & Jalkh, Naji & Xu, Yahua & Zhang, Hongwei, 2021. "Spillovers in higher moments and jumps across US stock and strategic commodity markets," Resources Policy, Elsevier, vol. 72(C).
    4. Li, Yanshuang & Zhuang, Xintian & Wang, Jian & Dong, Zibing, 2021. "Analysis of the impact of COVID-19 pandemic on G20 stock markets," The North American Journal of Economics and Finance, Elsevier, vol. 58(C).
    5. Bouri, Elie & Chen, Qian & Lien, Donald & Lv, Xin, 2017. "Causality between oil prices and the stock market in China: The relevance of the reformed oil product pricing mechanism," International Review of Economics & Finance, Elsevier, vol. 48(C), pages 34-48.
    6. Zou, Yingchao & Yu, Lean & Tso, Geoffrey K.F. & He, Kaijian, 2020. "Risk forecasting in the crude oil market: A multiscale Convolutional Neural Network approach," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 541(C).

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