Title: Non-linear cointegration between crude oil and stock markets: evidence from Asia-Pacific countries

Authors: Sufang Li; Huiming Zhu; Rong Li

Addresses: School of Statistics and Mathematics, Zhongnan University of Economics and Law, Wuhan 430073, China ' College of Business Administration, Hunan University, Changsha 410082, China ' Department of Economics, Huaihua College, Huaihua 418000, China

Abstract: This paper aims to investigate the possible linkage and non-linear interaction between crude oil and stock markets using cointegration and causality tests. Daily data on world crude oil prices and the stock indices of Japan, Taiwan, South Korea, Australia, Indonesia, India, Singapore and Malaysia are selected for this study. Unlike the previous literature, by conducting a non-linear cointegration analysis, we obtain evidence of non-linear long-term equilibrium between crude oil and stock markets for the eight Asia-Pacific markets. The Granger causality tests demonstrate the existence of bidirectional short-run Granger causality between crude oil and these Asia-Pacific stock markets. The long-run Granger causality between them is unidirectional. However, the speed of adjustment toward long-run equilibrium is relatively slow.

Keywords: cointegration; nonlinear analysis; crude oil; Asia-Pacific stock markets; Granger causality; Japan; Taiwan; South Korea; Australia; Indonesia; India; Singapore; Malaysia; long-term equilibrium.

DOI: 10.1504/IJGEI.2013.065171

International Journal of Global Energy Issues, 2013 Vol.36 No.5/6, pp.277 - 292

Received: 30 Mar 2013
Accepted: 26 Apr 2014
Published online: 21 Nov 2014 *

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