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Spillover Effects between Crude Oil Returns and Uncertainty: New Evidence from Time-Frequency Domain Approaches

Author

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  • Kais Tissaoui

    (Management Information Systems Department, Applied College, University of Ha’il, Hail City P.O. Box 2440, Saudi Arabia
    The International Finance Group, Faculty of Economic Sciences and Management of Tunis, University of Tunis El Manar, Tunis 1068, Tunisia)

  • Ilyes Abidi

    (Management Information Systems Department, Applied College, University of Ha’il, Hail City P.O. Box 2440, Saudi Arabia)

  • Nadia Azibi

    (Department of Health Management, College of Public Health and Health Informatics, University of Ha’il, Hail City P.O. Box 2440, Saudi Arabia)

  • Mariem Nsaibi

    (Management Information Systems Department, Applied College, University of Ha’il, Hail City P.O. Box 2440, Saudi Arabia)

Abstract

This paper examines the extent to which uncertainty in the energy market, the financial market, the commodity market, the economic policy, and the geopolitical events affect crude oil returns. To consider the complex properties of time series, such as nonlinearity, temporal variability, and unit roots, we adopt a two-instrument technique in the time–frequency domain that employs the DCC-GARCH (1.1) model and the Granger causality test in the frequency domain. This allows us to estimate the dynamic transmission of uncertainty from various sources to the oil market in the time and frequency domains. Significant dynamic conditional correlations over time are found between oil returns—commodity uncertainty, oil returns—equity market uncertainty, and oil returns—energy uncertainty. Furthermore, at each frequency, the empirical results demonstrate a significant spillover effect from the commodity, energy, and financial markets to the oil market. Additionally, we discover that sources with high persistence volatility (such as commodities, energy, and financial markets) have more interactions with the oil market than sources with low persistence volatility (economic policy and geopolitical risk events). Our findings have significant ramifications for boosting investor trust in risky energy assets.

Suggested Citation

  • Kais Tissaoui & Ilyes Abidi & Nadia Azibi & Mariem Nsaibi, 2024. "Spillover Effects between Crude Oil Returns and Uncertainty: New Evidence from Time-Frequency Domain Approaches," Energies, MDPI, vol. 17(2), pages 1-24, January.
  • Handle: RePEc:gam:jeners:v:17:y:2024:i:2:p:340-:d:1316069
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    References listed on IDEAS

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    2. Haykel Tlili & Kais Tissaoui & Bassem Kahouli & Rabab Triki, 2024. "How volatility in the oil market and uncertainty shocks affect Saudi economy: a frequency approach," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-24, December.

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