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Journal of Economic Integration 2021 December;36(4) :718-744.
Symmetric and Asymmetric Causal Relationship between Oil Prices and G7 Stock Markets: A Bootstrap Rolling-Window Granger Causality Test

Khaled Mokni1,2 Mohamed Sahbi Nakhli3,4 Othman Mnari3,4 Khemaies Bougatef 3

1,2Northern Border University, Saudi Arabia
2Gabès University, Tunisia
3,4University of Kairouan, Tunisia
4University of Sousse, Tunisia
Corresponding Author: Khaled Mokni ,Email:
Copyright ©2021 Journal of Economic Integration
This study examines the causal relationships between oil prices and the MSCI stock index of G7 countries between September 2004 and October 2020. This study is novel in implementing symmetric and asymmetric time-varying causality tests based on the bootstrap rolling-window approach. The results reveal that the causal link between oil prices and G7 stock markets is time-dependent. The periods of bidirectional causality roughly coincide with the global financial crisis and the ongoing COVID-19 pandemic. When asymmetry is accounted for, the results suggest an asymmetric causality between the two markets expressed by different patterns regarding positive and negative oil shocks. The results also indicate symmetric causality during the COVID-19 pandemic. These findings have implications for portfolio design and hedging strategies that are important to both policymakers and investors.

JEL Classification
G10: General
Q43: Energy and the Macroeconomy
Keywords: oil price | stock market | G7 country | time-varying causality | asymmetry
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