Search results

1 – 10 of over 32000
To view the access options for this content please click here
Article
Publication date: 19 July 2021

Taicir Mezghani, Fatma Ben Hamadou and Mouna Boujelbène Abbes

The aim of this study was to investigate the dynamic network connectedness between stock markets and commodity futures and its implications on hedging strategies…

Abstract

Purpose

The aim of this study was to investigate the dynamic network connectedness between stock markets and commodity futures and its implications on hedging strategies. Specifically, the authors studied the impact of the 2014 oil price drop and coronavirus disease 2019 (COVID-19) pandemic on risk spillovers and portfolio allocation among stock markets (United States (SP500), China (SSEC), Japan (Nikkei 225), France (CAC40) and Germany (DAX)) and commodities (oil and gold).

Design/methodology/approach

In this study, the authors used the Baba, Engle, Kraft and Kroner–generalized autoregressive conditional heteroskedasticity (BEKK–GARCH) model to estimate shock transmission among the five financial markets and the two commodities. The authors rely on Diebold and Yılmaz (2014, 2015) methodology to construct network-associated measures.

Findings

Relying on the BEKK–GARCH, the authors found that the recent health crisis of COVID-19 intensified the volatility spillovers among stock markets and commodities. Using the dynamic network connectedness, the authors showed that at the 2014 oil price drop and the COVID-19 pandemic shock, the Nikkei225 moderated the transmission of volatility to the majority of markets. During the COVID-19 pandemic, the commodity markets are a net receiver of volatility shocks from stock markets. In addition, the SP500 stock market dominates the network connectedness dynamic during the COVID-19 pandemic, while DAX index is the weakest risk transmitter. Regarding the portfolio allocation and hedging strategies, the study showed that the oil market is the most vulnerable and risky as it was heavily affected by the two crises. The results show that gold is a hedging tool during turmoil periods.

Originality/value

This study contributes to knowledge in this area by improving our understanding of the influence of fluctuations in oil prices on the dynamics of the volatility connection between stock markets and commodities during the COVID-19 pandemic shock. The study’s findings provide more implications regarding portfolio management and hedging strategies that could help investors optimize their portfolios.

Details

Asia-Pacific Journal of Business Administration, vol. 13 no. 4
Type: Research Article
ISSN: 1757-4323

Keywords

To view the access options for this content please click here
Book part
Publication date: 23 September 2019

Yi-Ming Wei, Qiao-Mei Liang, Gang Wu and Hua Liao

Abstract

Details

Energy Economics
Type: Book
ISBN: 978-1-83867-294-2

To view the access options for this content please click here
Article
Publication date: 27 May 2020

Amir Saadaoui, Kais Saidi and Mohamed Kriaa

This paper aims at looking into the transmission of shocks between bond and oil markets using a bivariate GARCH (BEKK and DCC) model. As lots of financial assets have been…

Abstract

Purpose

This paper aims at looking into the transmission of shocks between bond and oil markets using a bivariate GARCH (BEKK and DCC) model. As lots of financial assets have been exchanged due to these index returns, it is essential for financial market participants to figure out the mechanism of volatility transmission through time and via these series for the purpose of taking optimal decisions of portfolio allocation. The outcomes drawn reveal an important volatility transmission between sovereign bond and oil indices, with great sensitivity during and after the subprime crisis period.

Design/methodology/approach

In this context, we propose our hypotheses. Indeed, our study aims to see whether the financial crisis has been responsible for the sharp drop in oil prices since October 2008. To this end, we suggest, in this paper, the empirical study of the shock transmission between the bond and oil markets, using BEK-GARCH and DCC models. To our knowledge, this is the first document using the BEKK-GARCH and the DCC models in studying the shock transmission between a sovereign bond and oil indices.

Findings

We have noticed that in the event of a disruption in the bond market, oil prices respond to these shocks in the short term. It has also been emphasized, however, that this relationship has exacerbated if the period has extended. This makes us conclude that the financial market situation affects the oil price only throughout the crisis period; and that this situation is causally significant only in the event of a severe crisis, such as those of subprime and sovereign debt.

Originality/value

The global financial system has been going through an acute crisis since mid-2007. This crisis, initially occurred only in the US real estate market, progressively affects the global financial system, and is now becoming a general economic crisis. The objective of this work is to analyze the effects of the current financial market disturbance on oil prices based on econometric models in order to promote the proper functioning of this study.

Details

Managerial Finance, vol. 46 no. 10
Type: Research Article
ISSN: 0307-4358

Keywords

To view the access options for this content please click here
Article
Publication date: 8 October 2020

Mouna Youssef and Khaled Mokni

This study aims to test the presence of herding behavior in commodity markets, including energy, metals and agriculture. Additionally, the authors investigate the possible…

Downloads
155

Abstract

Purpose

This study aims to test the presence of herding behavior in commodity markets, including energy, metals and agriculture. Additionally, the authors investigate the possible asymmetric effect of oil price changes on the herding behavior in these markets.

Design/methodology/approach

The authors examine herding based on the cross-sectional absolute deviation (CSAD) model in a static and time-varying perspective.

Findings

By using daily data over the period 2003–2017, the authors’ findings firstly support the dynamic nature of investor behavior in commodity markets, which oscillates between antiherding during the normal period and herding during and after the global financial crisis of 2008. Furthermore, results highlight that the asymmetric impact of oil shocks on herding differs across commodity sectors and periods. Additionally, herding seems to be more pronounced when the oil market declines, which may be due to the pessimistic investors' sentiments.

Practical implications

This study provides insight into what factors influence herd behavior in commodity markets. The understanding of factors driving herding aids investors to avoid the impact of this behavior and its consequences

Originality/value

To the authors’ knowledge, this study is the first to examine whether the level of herding depends on the oil price fluctuations, as well as the asymmetric effect of the oil price on herding behavior in commodity markets.

Details

Managerial Finance, vol. 47 no. 4
Type: Research Article
ISSN: 0307-4358

Keywords

To view the access options for this content please click here
Article
Publication date: 1 January 2000

Robert Faff and TIMOTHY J. BRAILSFORD

In this paper we employ a GMM‐based approach to test the restrictions imposed by a two‐factor ‘market and oil’ pricing model when a risk‐free asset is assumed to exist. We…

Abstract

In this paper we employ a GMM‐based approach to test the restrictions imposed by a two‐factor ‘market and oil’ pricing model when a risk‐free asset is assumed to exist. We examine the Australian market which has several interesting features including self‐sufficiency in relation to oil, a large concentration of natural resource companies, susceptibility to the ‘Dutch disease’ and a diverse industry base. We extend previous literature by examining industry sector equity returns as different industry groups are likely to have different exposures to an oil factor, particularly in Australia. In the formal tests, we find evidence in favour of the model, particularly for industrial sector industries. The preferred model includes a domestic portfolio proxy for market returns in addition to the oil price factor and we find evidence of a positive market risk premium as well as a significantly priced oil factor.

Details

Pacific Accounting Review, vol. 12 no. 1
Type: Research Article
ISSN: 0114-0582

To view the access options for this content please click here
Article
Publication date: 10 May 2013

Musibau Adetunji Babatunde, Olayinka Adenikinju and Adeola F. Adenikinju

The purpose of this study is to investigate the interactive relationships between oil price shocks and the Nigeria stock market.

Downloads
3008

Abstract

Purpose

The purpose of this study is to investigate the interactive relationships between oil price shocks and the Nigeria stock market.

Design/methodology/approach

The paper applied the multivariate vector auto‐regression that employed the generalized impulse response function and the forecast variance decomposition error.

Findings

Empirical evidence reveals that stock market returns exhibit insignificant positive response to oil price shocks but reverts to negative effects after a period of time depending on the nature of the oil price shocks. The results are similar even with the inclusion of other variables. Also, the asymmetric effect of oil price shocks on the Nigerian stock returns indices is not supported by statistical evidences.

Originality/value

This is the first study to examine the dynamic linkages between stock market behaviour and oil price shocks in Nigeria.

Details

Journal of Economic Studies, vol. 40 no. 2
Type: Research Article
ISSN: 0144-3585

Keywords

To view the access options for this content please click here
Article
Publication date: 18 September 2019

Mouna Abdelhedi and Mouna Boujelbène-Abbes

The purpose of this paper is to empirically investigate the volatility spillover between the Chinese stock market, investor’s sentiment and oil market, specifically during…

Abstract

Purpose

The purpose of this paper is to empirically investigate the volatility spillover between the Chinese stock market, investor’s sentiment and oil market, specifically during the 2014‒2016 turmoil period.

Design/methodology/approach

This study used the daily and monthly China market price index, oil-price index and composite index of Chinese investor’s sentiment. The authors first use the DCC GARCH model in order to study the correlation between variables. Second, the authors use a continuous wavelet decomposition technique so as to capture both time- and frequency-varying features of co-movement variables. Finally, the authors examine the spillover effects by estimating the BEKK GARCH model.

Findings

The wavelet coherency results indicate a substantial co-movement between oil and Chinese stock markets in the periods of high volatility. BEKK GARCH model outcomes confirm this relation and report the noteworthy bidirectional transmission of volatility between oil market shocks and the Chinese investor’s sentiment, chiefly in the crisis period. These results support the behavioral theory of contagion and highlight that the Chinese investor’s sentiment is a channel through which shocks are transmitted between the oil and Chinese equity markets. Thus, these results are important for Chinese authorities that should monitor the investor’s sentiment to better control the interaction between financial and real markets.

Originality/value

This study makes three major contributions to the existing literature. First, it pays attention to the recent 2015 Chinese stock market bumble. Second, it has gone some way toward enhancing our understanding of the volatility spillover between the investor’s sentiment, investor’s sentiment variation, oil prices and stock market returns (variables of interest) during oil and stock market crises. Third, it uses the continuous wavelet decomposition technique since it reveals the linkage between variables of interest at different time horizons.

Details

International Journal of Emerging Markets, vol. 15 no. 2
Type: Research Article
ISSN: 1746-8809

Keywords

To view the access options for this content please click here
Article
Publication date: 18 November 2013

Achraf Ghorbel and Younes Boujelbene

This paper aims to employ GARCH-class models (GARCH, IGARCH and CGARCH) to estimate the volatility persistence on crude oil, US, Gulf Corporation Council (GCC), Brazil…

Abstract

Purpose

This paper aims to employ GARCH-class models (GARCH, IGARCH and CGARCH) to estimate the volatility persistence on crude oil, US, Gulf Corporation Council (GCC), Brazil, Russia, India and China (BRIC) stock markets. Also, the paper investigates the volatility spillover and the dynamic conditional correlation between crude oil, US stock index and stock indices of GCC and BRIC countries. The results prove a high degree of volatility persistence in the crude oil and stock markets. Based on the BEKK-GARCH and DCC-GARCH results, the paper finds strong evidence of the contagion effect of the oil shock and US financial crisis of 2008 on GCC and BRIC stock markets.

Design/methodology/approach

In the beginning, the paper uses univariate GARCH models to estimate the volatility persistence of the oil market, US stock market, and GCC and BRIC stock markets. Then, the paper uses a trivariate BEKK-GARCH model of Malik and Hammoudeh to examine the volatility spillover between oil market, US stock market and stock markets for GCC and BRIC countries. Finally, the paper analyses the dynamic conditional correlation between US market and each stock market of GCC and BRIC countries using the DCC-GARCH model. Also, the paper estimates the dynamic conditional correlation between oil market and all stock markets.

Findings

The results indicate the contagion effect of the oil shock and US financial crisis of 2008 on the GCC stock markets which are among the most important oil-exporting countries and also on BRIC stock markets which are among the emergent countries which are characterized by high economic growth level.

Originality/value

The contribution of this paper is to investigate the existence of contagion effect between oil market, US stock market and two panels of emerging stock markets which have different economic characteristics, the GCC and BRIC countries, during the oil shock and US financial crisis period of 2008-2009.

Details

International Journal of Energy Sector Management, vol. 7 no. 4
Type: Research Article
ISSN: 1750-6220

Keywords

To view the access options for this content please click here
Article
Publication date: 13 August 2019

Wajdi Hamma, Bassem Salhi, Ahmed Ghorbel and Anis Jarboui

The purpose of this paper is to analyze the optimal hedging strategy of the oil-stock dependence structure.

Abstract

Purpose

The purpose of this paper is to analyze the optimal hedging strategy of the oil-stock dependence structure.

Design/methodology/approach

The methodology consists to model the data over the daily period spanning from January 02, 2002 to May 19, 2016 by a various copula functions to better modeling the dependence between crude oil market and stock markets, and to use dependence coefficients and conditional variance to calculate optimal portfolio weights and optimal hedge ratios, and to suggest the best hedging strategy for oil-stock portfolio.

Findings

The findings show that the Gumbel copula is the best model for modeling the conditional dependence structure of the oil and stock markets in most cases. They also indicate that the best hedging strategy for oil price by stock market varies considerably over time, but this variation depends on both the index introduced and the model used. However, the conditional copula method with skewed student more effective than the other models to minimize the risk of oil-stock portfolio.

Originality/value

This research implication can be valuable for portfolio managers and individual investors who seek to make earnings by diversifying their portfolios. The findings of this study provide evidence of the importance of stock assets for making an optimal portfolio consisting of oil in the case of investments in oil and stock markets. This paper attempts to fill the voids in the literature on volatility among oil prices and stock markets in two important areas. First, it uses copulas to investigate the conditional dependence structure of the oil crude and stock markets in the oil exporting and importing countries. Second, it uses the dependence coefficients and conditional variance to calculate dynamic hedge ratios and risk-minimizing optimal portfolio weights for oil–stock.

Details

International Journal of Energy Sector Management, vol. 14 no. 2
Type: Research Article
ISSN: 1750-6220

Keywords

To view the access options for this content please click here
Article
Publication date: 18 April 2017

Bhaskar Bagchi

The purpose of this paper is to examine the dynamic relationship between crude oil price volatility and stock markets in the emerging economies like BRIC (Brazil, Russia…

Abstract

Purpose

The purpose of this paper is to examine the dynamic relationship between crude oil price volatility and stock markets in the emerging economies like BRIC (Brazil, Russia, India and China) countries in the context of sharp continuous fall in the crude oil price in recent times.

Design/methodology/approach

The stock price volatility is partly explained by volatility in crude oil price. The author adopt an Asymmetric Power ARCH (APARCH) model which takes into account long memory behavior, speed of market information, asymmetries and leverage effects.

Findings

For Bovespa, MICEX, BSE Sensex and crude oil there is an asymmetric response of volatilities to positive and negative shocks and negative correlation exists between returns and volatility indicating that negative information will create greater volatility. However, for Shanghai Composite positive information has greater effect on stock price volatility in comparison to negative information. The study results also suggest the presence long memory behavior and persistent volatility clustering phenomenon amongst crude oil price and stock markets of the BRIC countries.

Originality/value

The present study makes a number of contributions to the existing literature in the following ways. First, the author have considered crude oil prices up to January 31, 2016, so that the study can reflect the impact of declining trend of crude oil prices on the stock indices which is also regarded as “new oil price shock” to measure the volatility between crude oil price and stock market indices of BRIC countries. Second, the volatility is captured by APARCH model which takes into account long memory behavior, speed of market information, asymmetries and leverage effects.

Details

International Journal of Emerging Markets, vol. 12 no. 2
Type: Research Article
ISSN: 1746-8809

Keywords

1 – 10 of over 32000