Oil and S&P 500 Markets: Evidence from the Nonlinear Model
This study begins by using a MTAR model to explore the asymmetric effects of error corrections between oil prices in the U.S.A and S&P 500 prices under different regimes. After confirming the lead/lag relationship between the S&P 500 and oil prices, we employ a STECM to analyze the short-ru...
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Format: | Article |
Language: | English |
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EconJournals
2012-05-01
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Series: | International Journal of Economics and Financial Issues |
Online Access: | https://econjournals.com/index.php/ijefi/article/view/201 |
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author | Yen-Hsien Lee Hao Fang |
author_facet | Yen-Hsien Lee Hao Fang |
author_sort | Yen-Hsien Lee |
collection | DOAJ |
description |
This study begins by using a MTAR model to explore the asymmetric effects of error corrections between oil prices in the U.S.A and S&P 500 prices under different regimes. After confirming the lead/lag relationship between the S&P 500 and oil prices, we employ a STECM to analyze the short-run return dynamics when there are deviations from the equilibrium between the two variables. Our empirical evidence shows that an asymmetric co-integration relationship exists between the S&P 500 and oil prices. In addition, the results of the Granger causality test based on the TECM document the unidirectional relationship from the oil price to the S&P 500 price. Moreover, the short-run adjustments of the mean reversion to equilibrium follow the LSTECM. The contribution of this study might be in that the LSTECM-GARCH model is well suited to describing the short-run return dynamics of the disequilibrium between the oil prices and S&P 500 prices in the U.S.A.
Keywords: Threshold Co-integration Test; Threshold Error-Correction Model; Stock Market; Oil Market; STECM-GARCH Model
JEL Classifications: C13; C22; C32; G18; G10; Q42
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format | Article |
id | doaj.art-bd4c1fbbbe7b48908ca6758deebf062b |
institution | Directory Open Access Journal |
issn | 2146-4138 |
language | English |
last_indexed | 2024-04-10T10:51:20Z |
publishDate | 2012-05-01 |
publisher | EconJournals |
record_format | Article |
series | International Journal of Economics and Financial Issues |
spelling | doaj.art-bd4c1fbbbe7b48908ca6758deebf062b2023-02-15T16:20:08ZengEconJournalsInternational Journal of Economics and Financial Issues2146-41382012-05-0123Oil and S&P 500 Markets: Evidence from the Nonlinear ModelYen-Hsien Lee0Hao Fang1Chung Yuan Christian UniversityGraduate Institute of Assets and Property Management, Hwa Hsia Institute of Technology This study begins by using a MTAR model to explore the asymmetric effects of error corrections between oil prices in the U.S.A and S&P 500 prices under different regimes. After confirming the lead/lag relationship between the S&P 500 and oil prices, we employ a STECM to analyze the short-run return dynamics when there are deviations from the equilibrium between the two variables. Our empirical evidence shows that an asymmetric co-integration relationship exists between the S&P 500 and oil prices. In addition, the results of the Granger causality test based on the TECM document the unidirectional relationship from the oil price to the S&P 500 price. Moreover, the short-run adjustments of the mean reversion to equilibrium follow the LSTECM. The contribution of this study might be in that the LSTECM-GARCH model is well suited to describing the short-run return dynamics of the disequilibrium between the oil prices and S&P 500 prices in the U.S.A. Keywords: Threshold Co-integration Test; Threshold Error-Correction Model; Stock Market; Oil Market; STECM-GARCH Model JEL Classifications: C13; C22; C32; G18; G10; Q42 https://econjournals.com/index.php/ijefi/article/view/201 |
spellingShingle | Yen-Hsien Lee Hao Fang Oil and S&P 500 Markets: Evidence from the Nonlinear Model International Journal of Economics and Financial Issues |
title | Oil and S&P 500 Markets: Evidence from the Nonlinear Model |
title_full | Oil and S&P 500 Markets: Evidence from the Nonlinear Model |
title_fullStr | Oil and S&P 500 Markets: Evidence from the Nonlinear Model |
title_full_unstemmed | Oil and S&P 500 Markets: Evidence from the Nonlinear Model |
title_short | Oil and S&P 500 Markets: Evidence from the Nonlinear Model |
title_sort | oil and s p 500 markets evidence from the nonlinear model |
url | https://econjournals.com/index.php/ijefi/article/view/201 |
work_keys_str_mv | AT yenhsienlee oilandsp500marketsevidencefromthenonlinearmodel AT haofang oilandsp500marketsevidencefromthenonlinearmodel |