Abstract
This paper investigates the connectedness, in time and frequency domain, between daily returns series of crude oil and petroleum products for the period January 11, 2003 to March 12, 2018. In doing so, we have applied DY (2012) and BK (2018) spillover method. The overall spillover index value obtained from DY (2012) method is 62.29% and from BK method index value fluctuates with frequency. Further empirical evidence shows that the total connectedness, in the time and frequency domain, as measured by a rolling-window approach, has dynamic and volatile characteristics. Our overall results show that there is a high level of partial contemporaneous relationship between jet fuel, heating oil, US gasoline as well as diesel. Furthermore, results from the wavelet multiple correlations (WMCs) and cross-correlation show that heating oil acts as a leader for a short time horizon, whereas gasoline at medium and longer time scale. The results from the DY spillover analysis suggest that among the series analyzed heating oil has the highest contribution to others, which is confirmed across frequencies by the BK spillover method (and the Brent contributes least to others at all frequency bands). These findings have important implications for a wide range of market participants, including investors, hedge funds, speculators, as well as for energy policy, with different temporal horizons.