Purpose
The purpose of this paper is to examine the price level and volatility impacts of oil prices on energy mutual funds (EMFs). The authors also examine specific fund characteristics which might influence those interactions.
Design/methodology/approach
The authors test for volatility transmission between the oil prices and the funds in the sample. Later, the authors test to see which fund characteristics impact these volatility interactions.
Findings
The results show oil price movements lead majority of sample EMFs. The authors also find a volatility feedback relationship with most of the sample. Furthermore, the authors show the fund characteristics to be important indicators of these interactions. Morningstar rating, market capitalization and management tenure are found to be significant drivers of the relationships between EMFs and oil prices.
Originality/value
To the knowledge, there is not a study in literature which examines these relationships.
This study analyzes price and volatility transmissions between nineteen real estate investment trusts (REITs) markets and the oil market. The REITs data represents a variety of countries at different stages of their development and the expanded analytical approach includes accounting for structural shifts as gradual processes-as opposed to strictly abrupt processes typically assumed in literature. Oil prices are found to primarily predict REITs prices in mature REITs markets, but the feedback from REITs to oil prices is weak. From the perspective of volatility, strong evidence of bidirectional transmission in majority of the markets is observed. This study further demonstrates the importance of accounting for gradual (smooth) structural shifts for price transmission analysis.
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