Spillover and quantile linkage between oil price shocks and stock returns: new evidence from G7 countries
Abstract The link between crude oil price and stock returns of the Group of Seven (G7) countries (Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States) was analyzed in this study using monthly data from January 1999 to March 2020. We adopt a similar approach to Kilian (Am...
| Main Authors: | , , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
SpringerOpen
2020-12-01
|
| Series: | Financial Innovation |
| Subjects: | |
| Online Access: | https://doi.org/10.1186/s40854-020-00208-y |
| _version_ | 1818329710401159168 |
|---|---|
| author | Yonghong Jiang Gengyu Tian Bin Mo |
| author_facet | Yonghong Jiang Gengyu Tian Bin Mo |
| author_sort | Yonghong Jiang |
| collection | DOAJ |
| description | Abstract The link between crude oil price and stock returns of the Group of Seven (G7) countries (Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States) was analyzed in this study using monthly data from January 1999 to March 2020. We adopt a similar approach to Kilian (Am Econ Rev 99(3):1053–1069, 2009) and construct a structural vector autoregression framework to decompose crude oil price shocks into oil supply shock, oil aggregate demand shock, and oil-specific demand shock. We then explore the distinct effects of different kinds of oil price shocks from various sources. Based on the decomposed oil price shocks, we apply the connectedness approach and QQ regression to find time-varying co-movements and tail dependence between oil price shocks and G7 stock returns. There is no general correlation between the decomposed oil prices and stock returns in these countries. The effects of oil price shocks on stock returns across different stock market conditions appear to be heterogeneous. Oil supply shock appears to be a net transmitter of spillover effects for all G7 countries within the sample period. |
| first_indexed | 2024-12-13T12:52:23Z |
| format | Article |
| id | doaj.art-b852cc0b74d74e85814f07aad48f8166 |
| institution | Directory Open Access Journal |
| issn | 2199-4730 |
| language | English |
| last_indexed | 2024-12-13T12:52:23Z |
| publishDate | 2020-12-01 |
| publisher | SpringerOpen |
| record_format | Article |
| series | Financial Innovation |
| spelling | doaj.art-b852cc0b74d74e85814f07aad48f81662022-12-21T23:45:18ZengSpringerOpenFinancial Innovation2199-47302020-12-016112610.1186/s40854-020-00208-ySpillover and quantile linkage between oil price shocks and stock returns: new evidence from G7 countriesYonghong Jiang0Gengyu Tian1Bin Mo2Institute of Finance, Jinan UniversityInstitute of Finance, Jinan UniversityInstitute of Finance, Guangzhou UniversityAbstract The link between crude oil price and stock returns of the Group of Seven (G7) countries (Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States) was analyzed in this study using monthly data from January 1999 to March 2020. We adopt a similar approach to Kilian (Am Econ Rev 99(3):1053–1069, 2009) and construct a structural vector autoregression framework to decompose crude oil price shocks into oil supply shock, oil aggregate demand shock, and oil-specific demand shock. We then explore the distinct effects of different kinds of oil price shocks from various sources. Based on the decomposed oil price shocks, we apply the connectedness approach and QQ regression to find time-varying co-movements and tail dependence between oil price shocks and G7 stock returns. There is no general correlation between the decomposed oil prices and stock returns in these countries. The effects of oil price shocks on stock returns across different stock market conditions appear to be heterogeneous. Oil supply shock appears to be a net transmitter of spillover effects for all G7 countries within the sample period.https://doi.org/10.1186/s40854-020-00208-yOil supply shockOil aggregate demand shockOil specific demand shockStock marketSpillover effectQuantile-on-quantile |
| spellingShingle | Yonghong Jiang Gengyu Tian Bin Mo Spillover and quantile linkage between oil price shocks and stock returns: new evidence from G7 countries Financial Innovation Oil supply shock Oil aggregate demand shock Oil specific demand shock Stock market Spillover effect Quantile-on-quantile |
| title | Spillover and quantile linkage between oil price shocks and stock returns: new evidence from G7 countries |
| title_full | Spillover and quantile linkage between oil price shocks and stock returns: new evidence from G7 countries |
| title_fullStr | Spillover and quantile linkage between oil price shocks and stock returns: new evidence from G7 countries |
| title_full_unstemmed | Spillover and quantile linkage between oil price shocks and stock returns: new evidence from G7 countries |
| title_short | Spillover and quantile linkage between oil price shocks and stock returns: new evidence from G7 countries |
| title_sort | spillover and quantile linkage between oil price shocks and stock returns new evidence from g7 countries |
| topic | Oil supply shock Oil aggregate demand shock Oil specific demand shock Stock market Spillover effect Quantile-on-quantile |
| url | https://doi.org/10.1186/s40854-020-00208-y |
| work_keys_str_mv | AT yonghongjiang spilloverandquantilelinkagebetweenoilpriceshocksandstockreturnsnewevidencefromg7countries AT gengyutian spilloverandquantilelinkagebetweenoilpriceshocksandstockreturnsnewevidencefromg7countries AT binmo spilloverandquantilelinkagebetweenoilpriceshocksandstockreturnsnewevidencefromg7countries |