Browsing by Subject "Volatility spillover"

Now showing 1 - 2 of 2

Open Access
Exploring shock and volatility transmission between oil and Chinese industrial raw materials
(Elsevier, 2021-01-07) Kirkulak-Uludag, B.; Safarzadeh, Omid
The main objective of this paper is to investigate the volatility spillover between oil prices and the Chinese industrial raw materials stock indices including oil, coal, iron and non-ferrous metals. In order to achieve this task, OPEC and WTI oil prices were used as oil benchmarks and several multivariate GARCH models were applied on daily closing prices of stock indices for the period from 2004 through 2014. Among the models, VAR-GARCH model fits the data best. The findings show significant volatility spillover between oil and the Chinese raw materials stock returns. However, the spillover is unidirectional and it is more apparent from past oil shocks to the Chinese raw materials stock returns. This unidirectional spillover can be attributed to the structure of the Chinese stock market, which is slightly integrating into the global stock markets and yet is detached from its own real economy. Moreover, the findings suggest that the conditional correlations of OPEC oil and the Chinese raw materials stock indices are higher than those of WTI oil and stock indices. Overall, the findings have important implications for both portfolio managers and policy makers in terms of risk management.
Open Access
The interactions between OPEC oil price and sectoral stock returns: Evidence from China
(Elsevier B.V., 2018) Kirkulak-Uludag, B.; Safarzadeh, O.
This paper examines the volatility spillover between OPEC oil price and the Chinese sectoral stock returns from December 31, 2004 through October 17, 2014. In order to achieve this task, we used the VAR-GARCH model for the daily closing prices of six sectoral stock indices including: Construction, Machinery, Automobile, Military, Agriculture, and Financial indices. In addition, we analyzed the optimal weights and hedge ratios for oil-stock portfolio holdings. The findings show significant volatility spillover between OPEC oil prices and the Chinese sectoral stock returns. The volatility spillover is unidirectional from oil to stock returns. The spillover effects mainly come from past shocks. The past oil shocks have negative and significant impact on the conditional volatility of Construction, Machinery, Automobile, Military and Agriculture stock indices. On the contrary, with the exception of the Military stock index, there is no significant impact of the past stock return shocks on the volatility of oil returns. Moreover, our findings for optimal weights and hedge ratios suggest that oil can improve the risk-adjusted performance of a well-diversified portfolio of stocks.