Abstract
•Oil–JSE link weak but spikes in crises; negative shocks hit key sectors most.•Oil offers hedging and diversification benefits for JSE sectors in turmoil.•Fat tails confirm extreme risks; nonlinear models best capture volatility.•Short-term oil–JSE ties aid hedging; long-term links show market convergence.
This study examines the asymmetric and sectoral resilience to oil price shocks across different time horizons, spanning from 2014 to 2025 and using the MODWT11Maximal Overlap Discrete Wavelet Transform–GJR22Glosten-Jagannathan-Runkle-GARCH33Generalised Autoregressive Conditional Heteroskedasticity and MODWT–DCC44Dynamic Conditional Correlation models. The results reveal a weak time-varying correlation between oil and the Johannesburg Stock Exchange (JSE) sectors, which changes depending on the type of shock, particularly during the COVID-19 pandemic and the Russian-Ukrainian war. Asymmetric volatility dynamics are in line with traditional inverse leverage effects. The MODWT-DCC results indicate sticky sectoral responses with limited short-term co-movement and considerable long-term trend persistence. Crude oil offers substantial diversification and strategic hedging. At high frequencies, investors actively rebalance to capitalise on short-term profits, while at lower frequencies, oil serves as a strategic hedge, particularly during times of crisis. The JSE sectors showed performance and resilience in crisis periods. Reducing reliance on oil-sensitive exports and promoting the growth of sophisticated risk management tools and derivatives markets are two ways to improve South Africa's economic resilience. The results emphasise the value of multi-scale methods for modeling volatility and correlation, providing insightful information for emerging market investors and regulators.