Abstract
The objective of our study is to assess the linkage between global oil and the US energy sector stock markets using their implied volatility indexes available from the Chicago Board of Options Exchange (CBOE). Our empirical analysis also includes the US VIX data in order to control for the effect of global equity market uncertainty. To investigate whether cointegration exists amongst the volatility series used, we consider applying the ARDL bound tests. The findings reveal that there exists a long-run relationship between oil and stock market implied volatility indexes. Besides, employing the Toda–Yamamoto version of the Granger causality test indicates short-run “lead-lag” associations between the implied volatilities of international oil and the US energy sector stock markets. The results carry important implications for investors and policymakers.
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