Abstract
This paper examines the volatility behaviour of West Texas Intermediate (WTI) crude oil and the S&P 500 stock market index from January 2007 to December 2024. Daily prices for WTI and the S&P 500 are collected from LSEG-DataStream. Univariate GARCH(1,1) models are applied to examine volatility patterns, as this model captures volatility persistence over time. Before applying the GARCH models, descriptive statistics, the Augmented Dickey-Fuller (ADF) test, ARCH-LM test, and correlation analysis are conducted to confirm the suitability of the data. The results show that both WTI and the S&P 500 are I(1) processes and that they experience strong volatility clustering. The results suggest that oil market shocks may reduce faster than equity market shocks, while the impact of oil volatility on stock markets depends on the cause of the shock. Understanding volatility in these markets is important for investors, risk managers, and policymakers because both markets provide useful information about economic and financial conditions and are of significant importance for investment portfolio diversification.
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Recommended Citation
Bharti, Bharti
(2026)
"Oil Shocks Fade, Equity Shocks Persist: Evidence from WTI Crude Oil and the S&P 500,"
Critical Letters in Economics & Finance:
Vol. 3:
Iss.
2, Article 1.
Available at:
https://arrow.tudublin.ie/clef/vol3/iss2/1