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What Affects the Relationship Between Oil Prices and the U.S. Stock Market? A Mixed-Data Sampling Copula Approach
[Risks and Portfolio Decisions Involving Hedge Funds]

Author

Listed:
  • Yuting Gong
  • Ruijun Bu
  • Qiang Chen

Abstract

The relationship between oil prices and stocks is an important issue for portfolio selection and risk management. This article proposes a mixed frequency data sampling copula model with explanatory variables that incorporates low-frequency explanatory variables into a high-frequency dynamic copula model. It enables us to investigate the impacts of economic factors on the relationship between oil and stocks. It is found that the dependence of oil and stock markets is influenced by aggregate demand and stock-specific negative news. The impact of aggregate demand lasts for two years, while the impact of stock-specific news lasts for one quarter.

Suggested Citation

  • Yuting Gong & Ruijun Bu & Qiang Chen, 2022. "What Affects the Relationship Between Oil Prices and the U.S. Stock Market? A Mixed-Data Sampling Copula Approach [Risks and Portfolio Decisions Involving Hedge Funds]," Journal of Financial Econometrics, Oxford University Press, vol. 20(2), pages 253-277.
    • Handle: RePEc:oup:jfinec:v:20:y:2022:i:2:p:253-277.
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    File URL: http://hdl.handle.net/10.1093/jjfinec/nbz043
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    Citations

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    Cited by:

    1. Yuting Gong & Xueqin Wang & Mo Zhu & Ying‐En Ge & Wenming Shi, 2023. "Maximum utility portfolio construction in the forward freight agreement markets: Evidence from a multivariate skewed t copula," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 43(1), pages 69-89, January.
    2. Shi, Wenming & Gong, Yuting & Yin, Jingbo & Nguyen, Son & Liu, Qian, 2022. "Determinants of dynamic dependence between the crude oil and tanker freight markets: A mixed-frequency data sampling copula model," Energy, Elsevier, vol. 254(PB).
    3. Tian, Maoxi & Alshater, Muneer M. & Yoon, Seong-Min, 2022. "Dynamic risk spillovers from oil to stock markets: Fresh evidence from GARCH copula quantile regression-based CoVaR model," Energy Economics, Elsevier, vol. 115(C).

    More about this item

    Keywords

    copula; crude oil; dependence; stock; mixed frequency;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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