Crude oil and stock markets: Causal relationships in tails?

This paper considers the causal relationships between WTI and Dubai crude oil returns and five stock index returns (S&P 500, Nikkei, Hang Seng, Shanghai, and KOSPI) within the quantile causality framework by using daily data for a period from January 1, 1996, to October 12, 2012. The quantile ca...

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Veröffentlicht in:Energy economics 2016-09, Vol.59, p.58-69
Hauptverfasser: Ding, Haoyuan, Kim, Hyung-Gun, Park, Sung Y.
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description This paper considers the causal relationships between WTI and Dubai crude oil returns and five stock index returns (S&P 500, Nikkei, Hang Seng, Shanghai, and KOSPI) within the quantile causality framework by using daily data for a period from January 1, 1996, to October 12, 2012. The quantile causality test is useful for a comprehensive understanding of the causal relationship between two returns. The test reveals several noteworthy results. First, although WTI returns are not closely related to Asian countries, some financial markets such as Nikkei and Hang Seng Granger-cause WTI returns. Second, the significance of causality from one market to another derives only from lower and upper levels of quantiles except for the case of causality from Nikkei to WTI returns. Third, all stock index returns Granger-cause Dubai crude oil returns over almost all quantile levels except for Shanghai returns. Fourth, Dubai crude oil returns Granger-cause all Asian stock index returns except for S&P 500 returns. Finally, the results indicate asymmetric causality from Dubai crude oil returns to Shanghai returns and KOSPI returns to Dubai crude oil returns. •Examine the causal relationship between the five stock indexes and the crude oil prices•Nikkei and Hang Seng stock indexes Granger-cause WTI prices.•Dubai crude oil returns cause all Asian stock index returns except for S&P 500 returns.•Significance of causality from one market to another is mainly from tail levels of quantiles.
doi_str_mv 10.1016/j.eneco.2016.07.013
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source PAIS Index; ScienceDirect Freedom Collection (Elsevier)
subjects Causality
Crude oil
Crude oil returns
Dubai United Arab Emirates
Energy economics
Markets
Oil
Petroleum
Quantile regression
Quantiles
Securities markets
Stock exchanges
Stock indexing
Stock returns
Studies
title Crude oil and stock markets: Causal relationships in tails?
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