Does the S&P500 index lead the crude oil dynamics? A complexity-based approach*

- Multivariate study with means of nonlinear causality tests.
- Inclusion of the futures-spot price spread for crude oil, accounting for short-term expectations.
- Detection of lead-lag relationship between S&P500 index and crude-oil spread, during 2004-2009.
- Oil financialization facilitated the development of behavioral trading activity.

Taking the complex property of nonlinear feedback connectivity into consideration, the goal of this paper is to apprehend the interdependences between the financial and energy sectors. Our contribution is both theoretical and methodological. We conduct a multivariate analysis employing nonlinear tools, namely the Partial Transfer Entropy and the Asymmetric Mackey-Glass causality test. In particular, we build a system comprising the petroleum complex (crude oil, gasoline and heating oil), the S&P500 index and the 1-month futures-spot spread for crude oil. By adopting a rolling-window approach, we observe a persistent lead-lag relationship between the S&P500 index and the market participants' expectations for crude oil, from 2004 to 2009. Depending on the bubble period in the stock market, it appears that the resulting coupling becomes subject to the deterioration of global economic activity, induced by large common shocks.