Do European Investors React to Extreme Oil Prices? Evidence from Granger Causality in Tails Test

Blanka Łęt

Abstract

In this paper we analyze relationship between selected European stock markets and crude oil market. The aim of our analysis is to check whether stock market participants react to extreme changes in oil price. Specifically, we verify whether there is contemporaneous and delayed Granger causality between occurrence of the extreme negative or positive returns on the crude oil market and main European stock markets. We use daily Brent futures prices and stock indices from Belgium, France, Germany, Greece, Italy, Netherlands, Norway, Poland, Spain, Sweden and United Kingdom. We implement Candelon and Tokpavi (2016) testing procedure. Our results show that in the analyzed period in most cases the symmetrical contemporaneous causality was dominant, i.e. extreme negative or positive returns on the oil market and stock markets occurred on the same day and had the same direction. Results of Granger delayed causality test show that more long-lasting reaction occurred as a result to the negative news from the oil market.
Author Blanka Łęt (WIiGE / KMS)
Blanka Łęt,,
- Department of Applied Mathematics
Pages353-361
Publication size in sheets0.5
Book Nešleha Josef, Lukáš Marek, Svoboda Miroslav, Rakovská Zuzana (eds.): European Financial Systems 2019: Proceedings of the 16th International Scientific Conference, 2019, Masaryk University, ISBN 978-80-210-9337-9, [978-80-210-9338-6], 664 p.
Keywords in Polishprzyczynowość w sensie Grangera w ogonach, ropa naftowa, rynek kapitałowy, ryzyko, wartość ekstremalna
Keywords in EnglishGranger causality in tails, crude oil, stock market, risk, extreme value
URL https://is.muni.cz/do/econ/sborniky/2019/Proceedings_final.pdf
Languageen angielski
Score (nominal)5
Score sourcepublisherList
ScoreMinisterial score = 5.0, 03-02-2020, ChapterFromConference
Publication indicators WoS Citations = 0
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