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Analysing systemic risk and time-frequency quantile dependence between crude oil prices and BRICS equity markets indices: A new look

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  • Tiwari, Aviral Kumar
  • Trabelsi, Nader
  • Alqahtani, Faisal
  • Hammoudeh, Shawkat

Abstract

This paper examines the dependence structure and the systemic risk between the return series of oil prices and the BRICS equity market indices, using the newly developed methods of the quantile coherency of Baruník and Kley (2015) and the nonparametric conditional value-at-risk causality (NCoVaR) and the NCoVaR Granger causality tests (NCoVaR-Gc) of Diks and Wolski (2018) for the period 2001–2018. Further, the traditional tests of Hiemstra and Jones (1994) and Diks & Panchenko (2005) are used for comparison purposes. The new methods have given rise to findings that are substantially different from those based on the two traditional approaches. From our frequency-dependence analysis, we find a significant long-term dependence coherency between the Russian, Brazilian and South African stock markets and oil shifts. However, the NCoVaR analysis demonstrates a robust instantaneous dependence in both directions between almost all of the BRICS stock markets (the exception is the Indian market) and the oil market. The NCoVaR-Gc analysis reveals a robust lagged dependence from the oil market onto the Chinese stock market only. These findings provide helpful insights for regulators and potential international investors.

Suggested Citation

  • Tiwari, Aviral Kumar & Trabelsi, Nader & Alqahtani, Faisal & Hammoudeh, Shawkat, 2019. "Analysing systemic risk and time-frequency quantile dependence between crude oil prices and BRICS equity markets indices: A new look," Energy Economics, Elsevier, vol. 83(C), pages 445-466.
    • Handle: RePEc:eee:eneeco:v:83:y:2019:i:c:p:445-466
    DOI: 10.1016/j.eneco.2019.07.014
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    More about this item

    Keywords

    NCoVaR; Systemic risk; Oil prices; Stock markets; BRICS;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G01 - Financial Economics - - General - - - Financial Crises
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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