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The interconnectedness between crude oil prices and stock returns in G20 countries

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  • Behera, Chinmaya
  • Rath, Badri Narayan

Abstract

This study examines the link between crude oil prices and stock returns in G20 countries. Using the dynamic connectedness approach and a dataset from March 24, 2014 to December 15, 2023, we found volatility transmission between stock returns and crude oil prices. Specifically, we observed that an average of 51.22% of shock on one asset spills over to all other assets. Additionally, our study identified the CAC 40 (France), FTSE 100 (United Kingdom), TMX (Canada), and IGBM (Spain) as major transmitters of shocks. For an in-depth understanding of the effects of crude oil prices on the stock market, we divided the countries into oil-exporting and oil-importing nations. We discovered that shock transmission in oil-exporting countries is negligible, while oil-importing countries experience significant shock transmission. Our findings have important implications for investors and policymakers, as they can maximize returns for the former and help the latter in stabilizing volatile markets.

Suggested Citation

  • Behera, Chinmaya & Rath, Badri Narayan, 2024. "The interconnectedness between crude oil prices and stock returns in G20 countries," Resources Policy, Elsevier, vol. 91(C).
    • Handle: RePEc:eee:jrpoli:v:91:y:2024:i:c:s0301420724003179
    DOI: 10.1016/j.resourpol.2024.104950
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    More about this item

    Keywords

    Volatility spillover; Dynamic connectedness; Stock returns; G20; Crude oil;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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