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Copula model dependency between oil prices and stock markets: Evidence from China and Vietnam

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  • Nguyen, Cuong C.
  • Bhatti, M. Ishaq

Abstract

The uncertainty of a country's economy, especially emerging economies, is partially due to the fluctuating of oil prices. There is also a growing concern about the relationship between oil price and stock markets in developing countries due to their heavy dependence on oil prices co-movements. This paper attempts to understand the relationship between China and Vietnam markets using nonparametric (chi- and K-plots) and parametric (copula) methods. We observe that the left tail dependency between international oil prices and Vietnam's stock market while Chinese market shows opposite results. These findings provide a new insight into the behavior between oil prices and stock markets, thus leading to meaningful implications for policy makers, investors and risk managers dealing with these two markets.

Suggested Citation

  • Nguyen, Cuong C. & Bhatti, M. Ishaq, 2012. "Copula model dependency between oil prices and stock markets: Evidence from China and Vietnam," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(4), pages 758-773.
    • Handle: RePEc:eee:intfin:v:22:y:2012:i:4:p:758-773
    DOI: 10.1016/j.intfin.2012.03.004
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    More about this item

    Keywords

    Chi-plot; Dependence structure; K-plot; Oil price; Stock market;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • 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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