Interdependence between oil and East Asian stock markets: Evidence from wavelet coherence analysis

Xiao Jing Cai, Shuairu Tian, Nannan Yuan, Shigeyuki Hamori

Research output: Contribution to journalArticle

26 Citations (Scopus)

Abstract

This paper examines the interdependence and causality relationship between oil and East Asian stock returns from 1992 to 2015 and provides a fresh perspective on portfolio diversification benefits using wavelet coherence analysis. We find that oil prices and the East Asian stock market move in phase, and oil prices lead to stock returns in the long run. We provide evidence that oil can reduce the risk in the short run, and the degree of risk reduction of oil-stock portfolios decreases over the long term. This study provides information that can guide investors in diversification efforts while investing in oil and East Asian stock markets.

Original languageEnglish
Pages (from-to)206-223
Number of pages18
JournalJournal of International Financial Markets, Institutions and Money
Volume48
DOIs
Publication statusPublished - May 1 2017
Externally publishedYes

Fingerprint

Oil
Wavelets
Asian stock markets
Interdependence
Oil prices
Stock returns
Causality
Asia
Diversification benefits
Investing
Portfolio diversification
Short-run
Risk reduction
Diversification
Investors

Keywords

  • East Asian stock markets
  • Oil-stock interdependence
  • Portfolio diversification
  • Price interdependence
  • Wavelet coherence analysis

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

Cite this

Interdependence between oil and East Asian stock markets : Evidence from wavelet coherence analysis. / Cai, Xiao Jing; Tian, Shuairu; Yuan, Nannan; Hamori, Shigeyuki.

In: Journal of International Financial Markets, Institutions and Money, Vol. 48, 01.05.2017, p. 206-223.

Research output: Contribution to journalArticle

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