Measuring Contagion Between Energy Market and Stock Market During Financial Crisis
Author | : Xiaoqian Wen |
Publisher | : |
Total Pages | : |
Release | : 2017 |
ISBN-10 | : OCLC:1305144747 |
ISBN-13 | : |
Rating | : 4/5 (47 Downloads) |
Download or read book Measuring Contagion Between Energy Market and Stock Market During Financial Crisis written by Xiaoqian Wen and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we apply time-varying copulas to investigate whether a contagion effect existed between energy and stock markets during the recent financial crisis. Using the WTI oil spot price, the S&P500 index, the Shanghai stock market composite index and the Shenzhen stock market component index returns, evidence was found for a significantly increasing dependence between crude oil and stock markets after the failure of Lehman Brothers, thus supporting the existence of contagion in the sense of Forbes and Rigobon's (2002) definition. Moreover, increased tail dependence and symmetry characterize all the paired markets. This indicates that significant increases in tail dependence are an actual dimension of the contagion phenomenon and that crude oil and stock prices are linked to the same degree regardless of whether markets are booming or crashing during the sample period. Finally, the contagion effect is found to be much weaker for China than the US. The empirical results have potentially important implications for risk management.