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Analysis of the international propagation of contagion between oil and stock markets

Author:
Zhang, Guofu, Liu, Wei
Source:
Energy 2018 v.165 pp. 469-486
ISSN:
0360-5442
Subject:
developed countries, economic crises, models, oils, stock exchange, Brazil, China, India
Abstract:
In this paper, we use time-varying copula and VAR-DAG models to investigate oil-stock contagion and its propagation among seven countries with different levels of economic development. Our results present evidence of positive lower tail dependence between oil and stock markets of the seven countries, which is indicative of contagion in the sense of Okimoto [1]. Evolution patterns of contagion are similar in the developed countries but different in the developing ones. Moreover, contagion is significantly affected by the 2008 financial crisis, and the contagious magnitude in China and India is considerably smaller than in the other five countries. The empirical evidence also suggests that oil-stock contagion is propagated from developed countries to developing ones, and Brazil is the most affected by the developed countries’ contagion.
Agid:
6161296