Spillovers between oil and stock returns in the US energy sector: Does idiosyncratic information matter?
By Yan-Ran Ma, Dayong Zhang, Qiang Ji, Jiao-feng Pan. Energy Economics, 2019
135 citations recorded by the source corpus.
This paper investigates the inter-connectedness between WTI oil price returns and the returns of listed firms in the US energy sector. Specifically, we focus on the issue of whether firm-level idiosyncratic information matters. A generalised dynamic factor model is used to separate common components from idiosyncratic components in these energy stocks. Systemic connectedness is then estimated following Diebold and Yilmaz (2014). Our empirical results demonstrate the important role of industrial-level common information in understanding the oil–stock relationship. A number of interesting points include: the US energy sector is the net contributor to WTI price changes, but the effect is mainly driven by industrial-level common information; the oil and gas industry dominates other industries in the energy sector; the dynamic analysis shows that although idiosyncratic information is mostly independent of oil shocks, individual energy stock returns do respond to WTI price movements.
Subfields: Economics and Econometrics, Renewable Energy, Sustainability and the Environment
View Paper: https://www.semanticscholar.org/paper/693ddc112d82d263218200a8e35172b4ddf449a4
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Citations in the corpus
- How COVID-19 drives connectedness among commodity and financial markets: Evidence from TVP-VAR and causality-in-quantiles techniques (2020, background): “Importantly, the rising number of oil-related financial derivatives has also increased faster the process of financialization in the oil market (See Ji and Zhang, 2019; Ma et al., 2019).”