Correlations between oil and stock markets : a wavelet-based approach

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dc.contributor.author Martín-Barragán, Belén
dc.contributor.author Ramos, Sofía B.
dc.contributor.author Veiga, Helena
dc.contributor.editor Universidad Carlos III de Madrid. Departamento de Estadística
dc.date.accessioned 2013-03-07T11:59:41Z
dc.date.available 2013-03-07T11:59:41Z
dc.date.issued 2013-03
dc.identifier.uri http://hdl.handle.net/10016/16432
dc.description.abstract In a global economy, shocks occurring in one market can spill over to other markets. This paper investigates the impact of oil shocks and stock markets crashes on correlations between stock and oil markets. We test changes in correlations at different scales with non-overlapping confidence intervals based on estimated wavelet correlations. Contrary to other approaches, this method does not need adjustment for heteroskedasticity biases on the correlation coefficients. Our results show that oil shocks affect the correlation between both markets. The evidence on the change of correlation between stock markets after an oil shock is weaker; except in some specific cases during the Kuwait war and the OPEC cutback period. Conversely, we only find weak evidence that stock market crashes change the correlation between oil and stock markets. Overall, the evidence gives support to including oil as an asset class in asset allocation strategies.
dc.description.sponsorship he authors acknowledge financial support from Financial Research Center–UNIDE and from the Spanish Ministry of Education and Science, research projects MTM2010-17323, ECO2011-25706, ECO2012-32401 and MTM2012-36163-C06-03.
dc.format.mimetype application/pdf
dc.language.iso eng
dc.relation.ispartofseries UC3M Working papers. Statistics and Econometrics
dc.relation.ispartofseries 13-04
dc.rights Atribución-NoComercial-SinDerivadas 3.0 España
dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.subject.other Correlations
dc.subject.other Financial shocks
dc.subject.other International Financial Markets
dc.subject.other Oil shocks
dc.subject.other Stock Market Returns
dc.subject.other Wavelets
dc.title Correlations between oil and stock markets : a wavelet-based approach
dc.type workingPaper
dc.subject.jel C40
dc.subject.jel E32
dc.subject.jel G15
dc.subject.jel F30
dc.subject.eciencia Estadística
dc.rights.accessRights openAccess
dc.relation.projectID Gobierno de España. MTM2010-17323
dc.relation.projectID Gobierno de España. ECO2011-25706
dc.relation.projectID Gobierno de España. ECO2012-32401
dc.relation.projectID Gobierno de España. MTM2012-36163-C06-03
dc.type.version submitedVersion
dc.identifier.repec ws130504
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