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Oil price and financial markets: Multivariate dynamic frequency analysis

Author

Listed:
  • Anna Creti

    (LEDa - Laboratoire d'Economie de Dauphine - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres, EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Zied Ftiti

    (Université de Tunis, OCRE - EDC Paris)

  • Khaled Guesmi

    (IPAG Lab - IPAG Lab - IPAG Business School, EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

Abstract

The aim of this paper is to study the degree of interdependence between oil price and stock market index into two groups of countries: oil-importers and oil-exporters. To this end, we propose a new empirical methodology allowing a time-varying dynamic correlation measure between the stock market index and the oil price series. We use the frequency approach proposed by Priestley and Tong (1973), that is the evolutionary co-spectral analysis. This method allows us to distinguish between short-run and medium-run dependence. In order to complete our study by analysing long-run dependence, we use the cointegration procedure developed by Engle and Granger (1987). We find that interdependence between the oil price and the stock market is stronger in exporters׳ markets than in the importers׳ ones.

Suggested Citation

  • Anna Creti & Zied Ftiti & Khaled Guesmi, 2014. "Oil price and financial markets: Multivariate dynamic frequency analysis," Post-Print hal-01517425, HAL.
    • Handle: RePEc:hal:journl:hal-01517425
    DOI: 10.1016/j.enpol.2014.05.057
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    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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