Linkages between global crude oil market volatility and financial market by complexity synchronization

Purpose The purpose of this paper is to investigate herding behavior around the crude oil market and the stock market and the possible cross-herding behavior between the two markets. The analysis examines also the herding behavior during financial turmoil and includes the investor sentiment and market volatility. Design/methodology/approach The authors use a modified version of the cross-sectional standard deviation and the cross-sectional absolute deviation to include investor sentiment, financial crisis and market volatility. Findings The authors find that the volatility of the stock market reduces the herding behavior around the oil market and boosts that around the stock market. However, the investors’ sentiment reduces the herding around the stock market and boosts that around the crude oil market. Consequently, the authors can conclude that the herding behavior around the two markets moves inversely and the herding in each market is enhanced by the lack of information in the other market. Research limitations/implications This paper is limited to the herding of stocks around the crude oil market and ignores the possible herding of commodities around the oil market. Originality/value The originality of the paper rests on the study of the possible cross-herding behavior between the oil market and the stock market especially during financial turmoil.

Download Full-text

Identifying the Asymmetric Channel of Crude Oil Risk Pass-Through to Macro Economy: Based on Crude Oil Attributes

Frontiers in Energy Research ◽

10.3389/fenrg.2021.739653 ◽

2022 ◽

Vol 9 ◽

Author(s):

Shuaishuai Jia ◽

Hao Dong ◽

Zhenzhen Wang

Keyword(s):

Crude Oil ◽

Financial Market ◽

Market Risk ◽

Test Method ◽

Commodity Market ◽

Oil Market ◽

Channel Effect ◽

The Impact ◽

Financial Market Risk

The impact channel of crude oil market risk on the macroeconomy is highly related to oil attributes. This paper uses a stepwise test method with dummy variables to identify the channel effect of commodity market risk as well as financial market risk and explore the characteristics of the channel effect in different periods dominated by different oil attributes. Furthermore, this paper investigates the asymmetric characteristics of the channel effect under the condition of crude oil returns heterogeneity. The empirical results show that: First, commodity market risk, as well as financial market risk plays a channel role in the impact of crude oil market risk on the macroeconomic operation. Second, there is a significant difference in the ability of the commodity market and financial market to cope with shocks of crude oil market risk in periods dominated by different attributes. During the period dominated by the commodity attribute of oil, both commodity market and financial market play the role of “risk buffer”; during the period dominated by dual attributes of oil, the commodity market risk plays the role of “risk buffer”, while the financial market risk plays the role of “magnifier” of the crude oil market risk. Third, the channel effect pattern and degree of commodity market risk and financial market risk are significantly asymmetric.

Download Full-text