TY - JOUR
T1 - Dynamic correlation between stock market and oil prices
T2 - The case of oil-importing and oil-exporting countries
AU - Filis, George
AU - Degiannakis, Stavros
AU - Floros, Christos
PY - 2011/6
Y1 - 2011/6
N2 - The paper investigates the time-varying correlation between stock market prices and oil prices for oil-importing and oil-exporting countries. A DCC-GARCH-GJR approach is employed to test the above hypothesis based on data from six countries; Oil-exporting: Canada, Mexico, Brazil and Oil-importing: USA, Germany, Netherlands. The contemporaneous correlation results show that i) although time-varying correlation does not differ for oil-importing and oil-exporting economies, ii) the correlation increases positively (negatively) in respond to important aggregate demand-side (precautionary demand) oil price shocks, which are caused due to global business cycle's fluctuations or world turmoil (i.e. wars). Supply-side oil price shocks do not influence the relationship of the two markets. The lagged correlation results show that oil prices exercise a negative effect in all stock markets, regardless the origin of the oil price shock. The only exception is the 2008 global financial crisis where the lagged oil prices exhibit a positive correlation with stock markets. Finally, we conclude that in periods of significant economic turmoil the oil market is not a "safe haven" for offering protection against stock market losses.
AB - The paper investigates the time-varying correlation between stock market prices and oil prices for oil-importing and oil-exporting countries. A DCC-GARCH-GJR approach is employed to test the above hypothesis based on data from six countries; Oil-exporting: Canada, Mexico, Brazil and Oil-importing: USA, Germany, Netherlands. The contemporaneous correlation results show that i) although time-varying correlation does not differ for oil-importing and oil-exporting economies, ii) the correlation increases positively (negatively) in respond to important aggregate demand-side (precautionary demand) oil price shocks, which are caused due to global business cycle's fluctuations or world turmoil (i.e. wars). Supply-side oil price shocks do not influence the relationship of the two markets. The lagged correlation results show that oil prices exercise a negative effect in all stock markets, regardless the origin of the oil price shock. The only exception is the 2008 global financial crisis where the lagged oil prices exhibit a positive correlation with stock markets. Finally, we conclude that in periods of significant economic turmoil the oil market is not a "safe haven" for offering protection against stock market losses.
KW - DCC-GARCH
KW - Dynamic correlation
KW - Oil price shocks
KW - Oil prices
KW - Stock market returns
UR - http://www.scopus.com/inward/record.url?scp=79953876011&partnerID=8YFLogxK
U2 - 10.1016/j.irfa.2011.02.014
DO - 10.1016/j.irfa.2011.02.014
M3 - Article
AN - SCOPUS:79953876011
SN - 1057-5219
VL - 20
SP - 152
EP - 164
JO - International Review of Financial Analysis
JF - International Review of Financial Analysis
IS - 3
ER -