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How connected is the oil-bank network? Firm-level and high-frequency evidence

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  • Zhang, Yunhan
  • Gabauer, David
  • Gupta, Rangan
  • Ji, Qiang

Abstract

By introducing a new generalized forecast error variance decomposition (GFEVD) approach that splits the same into its contemporaneous and lagged components, we investigate the risk spillover effects of different order moments, derived from intraday data, for the top 10 banks and top 10 oil and gas companies in the U.S., covering the period from December 29, 2017 to December 30, 2022. The study finds that, first, the dynamic total connectedness of all order moments is heterogeneous over time driven by economic events. Second, except realized volatility spillovers, the vast majority of overall spillovers are attributable to contemporaneous spillovers, while only a tiny fraction is associated with lagged spillovers. Finally, realized skewness (crash risk) and realized kurtosis (extreme events) in banks and oil and gas companies originate mainly from intra-industry rather than inter-industry transmission.

Suggested Citation

  • Zhang, Yunhan & Gabauer, David & Gupta, Rangan & Ji, Qiang, 2024. "How connected is the oil-bank network? Firm-level and high-frequency evidence," Energy Economics, Elsevier, vol. 136(C).
    • Handle: RePEc:eee:eneeco:v:136:y:2024:i:c:s014098832400392x
    DOI: 10.1016/j.eneco.2024.107684
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    More about this item

    Keywords

    Banking connectedness; TVP-VAR; Higher moments; Dynamic connectedness; GFEVD decomposition;
    All these keywords.

    JEL classification:

    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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