Dependences and volatility spillovers between the oil and stock markets: New evidence from the copula and VAR-BEKK-GARCH models

Lean Yu, Rui Zha, Dimitrios Stafylas, Kaijian He, Jia Liu*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


This paper examines the dynamic relationship between the oil market and stock markets from two perspectives: dependence between the crude oil market (WTI) and stock markets of the US and China, and volatility spillovers between them during 1991–2016. We further analyze structural breaks of market dependences and consider the extent of their influence on such relationships. Our vine-copula results show that the dependences between the three paired markets, WTI-US, WTI-China and US-China, vary dynamically across the six identified structural break periods. In particular, the dependence between WTI-US is stronger and more volatile than that between WTI-China during most of the periods. The dependence between US-China remains at a lower level in the earlier periods, but increases in the final period. Our VAR-BEKK-GARCH results demonstrate distinctive volatility spillovers across these periods, with varying directionality, in response to the structural changes. Overall, our results indicate that the oil market stimulates rapid and continual fluctuations in market dependences, which become manifest most acutely in the aftermath of the Financial Crisis of 2007–08, demonstrating the increasing interdependence between the oil and stock markets. Further, the growing influence of China on the dynamics of these relationships, in the period following the Great Recession, presents evidence that it begins to assume an increasingly important role in global economic recovery.

Original languageEnglish
Article number101280
JournalInternational Review of Financial Analysis
Early online date7 May 2019
Publication statusPublished - Mar 2020

Bibliographical note

Funding Information:
This work was partially supported by grants from the Key Program of National Natural Science Foundation of China (NSFC nos. 71433001 , 71631005 ), National Natural Science Foundation of China (NSFC No. 71671013 ), the National Program for Support of Top-Notch Young Professionals , Beijing Advanced Innovation Center for Soft Matter Science and Engineering , Humanities and Social Sciences Youth Foundation of Ministry of Education of China (No. 16YJC790026 ).

Publisher Copyright:
© 2018 Elsevier Inc.


  • Copula model
  • Dependence
  • Multivariate GARCH model
  • Oil market
  • Stock market
  • Volatility spillover

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