Frequency spillover effects and cross-quantile dependence between crude oil and stock markets: Evidence from BRICS and G7 countries

Abstract

This study investigates the lead-lag nonlinear dependence relationship between crude oil and stock markets by employing a joint analysis of both frequency and cross-quantile perspectives. We propose a novel rolling window cross-quantile approach to capture the dynamic nonlinear dependencies across market conditions. Our empirical findings reveal that BRICS countries primarily receive net spillovers, while G7 countries, with the exception of Japan, act as net transmitters of spillovers. Additionally, with an extended time span, crude oil transitions from being a risk receiver to becoming a risk transmitter. Furthermore, the stock market returns of twelve countries are extremely vulnerable to oil price shocks under extreme market conditions, and the dependence between the crude oil and Russian stock returns is the highest. Finally, significant crisis events can briefly amplify the magnitude of risk spillovers. Overall, these discoveries furnish valuable insights for policymakers and investors seeking to refine their policies and investment strategies to reduce uncertainties in stock returns.