Extreme time–frequency connectedness between oil shocks and sectoral markets in the United States
Abstract This study assessed the connectedness between oil shocks and industry stock indexes in the United States (US). We consider the normal and extreme conditions across different frequency horizons, and the quantile time–frequency connectedness method is used to determine the tail risk contagion...
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| Format: | Article |
| Language: | English |
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SpringerOpen
2025-01-01
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| Series: | Financial Innovation |
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| Online Access: | https://doi.org/10.1186/s40854-025-00755-2 |
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| author | Oguzhan Ozcelebi Jose Pérez-Montiel Sang Hoon Kang |
| author_facet | Oguzhan Ozcelebi Jose Pérez-Montiel Sang Hoon Kang |
| author_sort | Oguzhan Ozcelebi |
| collection | DOAJ |
| description | Abstract This study assessed the connectedness between oil shocks and industry stock indexes in the United States (US). We consider the normal and extreme conditions across different frequency horizons, and the quantile time–frequency connectedness method is used to determine the tail risk contagion under different frequency horizons. Our results reveal that the short-term frequency connectedness significantly exceeds the long-term frequency connectedness. We also indicate that the connectedness in the lower and upper quantiles is greater than at the conditional mean. Importantly, oil risk shock is the biggest net transmitter of shocks to the US sectors in normal and extreme conditions, highlighting that oil risk shocks cause substantial variations in US sector stock returns in the short, medium, and long term. Finally, QAR(3) model demonstrates the significant impact of oil risk shocks on US sector stock returns during extreme and normal conditions. Therefore, our study underscores the role of asymmetry in the reaction of US sector stock returns to oil-related shocks, and we suggest that policies aimed at overcoming the adverse effects of oil shocks on stock markets and promoting financial stability should incorporate asymmetric features. |
| format | Article |
| id | doaj-art-1dc30d8a53b94d76bb596da0138d6a84 |
| institution | Kabale University |
| issn | 2199-4730 |
| language | English |
| publishDate | 2025-01-01 |
| publisher | SpringerOpen |
| record_format | Article |
| series | Financial Innovation |
| spelling | doaj-art-1dc30d8a53b94d76bb596da0138d6a842025-01-26T12:48:43ZengSpringerOpenFinancial Innovation2199-47302025-01-0111113110.1186/s40854-025-00755-2Extreme time–frequency connectedness between oil shocks and sectoral markets in the United StatesOguzhan Ozcelebi0Jose Pérez-Montiel1Sang Hoon Kang2Department of Economics, Istanbul UniversityDepartment of Applied Economics, University of the Balearic IslandsDepartment of Business Administration, Pusan National UniversityAbstract This study assessed the connectedness between oil shocks and industry stock indexes in the United States (US). We consider the normal and extreme conditions across different frequency horizons, and the quantile time–frequency connectedness method is used to determine the tail risk contagion under different frequency horizons. Our results reveal that the short-term frequency connectedness significantly exceeds the long-term frequency connectedness. We also indicate that the connectedness in the lower and upper quantiles is greater than at the conditional mean. Importantly, oil risk shock is the biggest net transmitter of shocks to the US sectors in normal and extreme conditions, highlighting that oil risk shocks cause substantial variations in US sector stock returns in the short, medium, and long term. Finally, QAR(3) model demonstrates the significant impact of oil risk shocks on US sector stock returns during extreme and normal conditions. Therefore, our study underscores the role of asymmetry in the reaction of US sector stock returns to oil-related shocks, and we suggest that policies aimed at overcoming the adverse effects of oil shocks on stock markets and promoting financial stability should incorporate asymmetric features.https://doi.org/10.1186/s40854-025-00755-2Oil shocksSector stock returnsQuantile connectednessQuantile Granger causalityQuantile autoregressive model |
| spellingShingle | Oguzhan Ozcelebi Jose Pérez-Montiel Sang Hoon Kang Extreme time–frequency connectedness between oil shocks and sectoral markets in the United States Financial Innovation Oil shocks Sector stock returns Quantile connectedness Quantile Granger causality Quantile autoregressive model |
| title | Extreme time–frequency connectedness between oil shocks and sectoral markets in the United States |
| title_full | Extreme time–frequency connectedness between oil shocks and sectoral markets in the United States |
| title_fullStr | Extreme time–frequency connectedness between oil shocks and sectoral markets in the United States |
| title_full_unstemmed | Extreme time–frequency connectedness between oil shocks and sectoral markets in the United States |
| title_short | Extreme time–frequency connectedness between oil shocks and sectoral markets in the United States |
| title_sort | extreme time frequency connectedness between oil shocks and sectoral markets in the united states |
| topic | Oil shocks Sector stock returns Quantile connectedness Quantile Granger causality Quantile autoregressive model |
| url | https://doi.org/10.1186/s40854-025-00755-2 |
| work_keys_str_mv | AT oguzhanozcelebi extremetimefrequencyconnectednessbetweenoilshocksandsectoralmarketsintheunitedstates AT joseperezmontiel extremetimefrequencyconnectednessbetweenoilshocksandsectoralmarketsintheunitedstates AT sanghoonkang extremetimefrequencyconnectednessbetweenoilshocksandsectoralmarketsintheunitedstates |