Oil price shocks, equity markets, and contagion effect in OECD countries
Creti, Anna; Abid, Ilyes; Guesmi, Khaled (2020), Oil price shocks, equity markets, and contagion effect in OECD countries, European Journal of Comparative Economics, 17, 2, p. 155-183. 10.25428/1824-2979/202002-155-183
TypeArticle accepté pour publication ou publié
Journal nameEuropean Journal of Comparative Economics
LIUC Università Cattaneo
MetadataShow full item record
Laboratoire d'Economie de Dauphine [LEDa]
Paris School of Business [PSB]
Abstract (EN)This paper revisits the dynamic linkages between the Brent oil market and OECD stock markets. Econometrically, we use a multivariate corrected dynamic conditional correlation fractionally integrated asymmetric power ARCH (c-DCC-FIAPARCH) process, controlling main financial time-series features such as asymmetry, volatility, and long memory. Based on daily data for 17 OECD stock markets from March 16, 1998 to February 23, 2018, we show three main findings. First, the impact of oil price shocks on the relationship between oil and stock markets is more pronounced during periods of global turmoil and asymmetric in all countries. Second, we do not observe a proper ‘contagion effect’ across all countries. Finally, this paper identifies five groups of countries based on the shape of the dynamic conditional correlation, which indicates that the relationship between oil and stock markets is segmented geographically. The findings have several policy implications.
Subjects / KeywordsFinancialization; Conditional correlations; Segmented geographically; c-DCC-FIAPARCH model
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