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Stock-oil comovements through fear, uncertainty, and expectations: Evidence from conditional comoments

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  • Noori, Mohammad

Abstract

This paper investigates the role of sentiment as a potential driver of the novel stock-oil (represented by the S&P 500 and West Texas Intermediate futures) dynamics in the aftermath of the 2008 global financial crisis (GFC). We study the impact of both sentiment shocks and fluctuations, on the stock-oil time-varying conditional comoments, using the time-varying parameter vector autoregression (TVP-VAR), and the nonlinear autoregressive distributed lag (NARDL), respectively. The findings show that the increasing (asymmetric) effect of sentiments, accounts for the novel post-GFC stock-oil dynamics. As a result, a proactive regulatory framework is needed to shield oil futures against the ever-increasing speculation and financialization.

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  • Noori, Mohammad, 2024. "Stock-oil comovements through fear, uncertainty, and expectations: Evidence from conditional comoments," International Review of Economics & Finance, Elsevier, vol. 93(PA), pages 529-551.
    • Handle: RePEc:eee:reveco:v:93:y:2024:i:pa:p:529-551
    DOI: 10.1016/j.iref.2024.03.047
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    More about this item

    Keywords

    Financial markets; Volatility modeling; Conditional comoments; Sentiment; Financial crises;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G1 - Financial Economics - - General Financial Markets
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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