Analyzing volatility spillovers and hedging between oil and stock markets: Evidence from wavelet analysis

Khalfaoui, Rabeh; Boutahar, Mohamed; Boubaker, Heni

doi:10.1016/j.eneco.2015.03.023

Cited by 235 publications

(105 citation statements)

References 39 publications

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“…Similar evidence was found by Ji and Fan (2012) who found that the crude oil market has significant volatility spillover effects on non-energy commodity markets and they have strengthened after the crisis. A similar result was also reported by Creti, Joëts, and Mignon (2013) who showed increased links between stock and commodity markets, and by Gomes and Chaibi (2014) who highlighted that shock and volatility spillovers tend to go more often from oil to stock markets than viceversa, see also Arouri and Nguyen (2010), Filis, Degiannakis, andFloros (2011), Kumar, Managi, andMatsuda (2012), Awartani and Maghyereh (2013) and Khalfaoui, Boutahar, and Boubaker (2015). Given this increased influence of the oil market on the other markets, regulators should consider a regulatory framework able to mitigate an oil price crash due to panic selling and/or market manipulation: a potential starting point could be the model developed by Dutt and Harris (2005), which can be used 21 to set position limits for cash-settled derivative contracts.…”

supporting

confidence: 63%

The oil price crash in 2014/15: Was there a (negative) financial bubble?

Fantazzini

2016

Energy Policy

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This paper suggests that there was a negative bubble in oil prices in 2014/15, which decreased them beyond the level justified by economic fundamentals. This proposition is corroborated by two sets of bubble detection strategies: the first set consists of tests for financial bubbles, while the second set consists of the log-periodic power law (LPPL) model for negative financial bubbles. Despite the methodological differences between these detection methods, they provided the same outcome: the oil price experienced a statistically significant negative financial bubble in the last months of 2014 and at the beginning of 2015. These results also hold after several robustness checks which consider the effect of conditional heteroskedasticity, model set-ups with additional restrictions, longer data samples, tests with lower frequency data and with an alternative proxy variable to measure the fundamental value of oil.

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confidence: 63%

The oil price crash in 2014/15: Was there a (negative) financial bubble?

Fantazzini

2016

Energy Policy

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“…over the quantiles of the distribution and more importantly in the tails of the distribution. Although this strand has received some attention recently (see for instance, Jammazi and Reboredo, 2016;Khalfaoui et al, 2015;Nguyen and Bhatti, 2012), results are by no means conclusive.…”

Section: Conclusion and Ideas For Further Studymentioning

confidence: 99%

Oil Prices and Stock Markets: A Review of the Theory and Empirical Evidence

Degiannakis¹,

Filis²,

Arora³

2018

The Energy Journal

191

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Do oil prices and stock markets move in tandem or in opposite directions? The complex and time varying relationship between oil prices and stock markets has caught the attention of the financial press, investors, policymakers, researchers, and the general public in recent years. In light of such attention, this paper reviews research on the oil price and stock market relationship. The majority of papers we survey study the impacts of oil markets on stock markets, whereas, little research in the reverse direction exists. Our review finds that the causal effects between oil and stock markets depend heavily on whether research is performed using aggregate stock market indices, sectorial indices, or firm-level data and whether stock markets operate in net oil-importing or net oil-exporting countries. Additionally, conclusions vary depending on whether studies use symmetric or asymmetric changes in the price of oil, or whether they focus on unexpected changes in oil prices. Finally, we find that most studies show oil price volatility transmits to stock market volatility, and that including measures of stock market performance improves forecasts of oil prices and oil price volatility. Several important avenues for further research are identified.

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“…Numerous past studies have contributed to the literature of volatility spillover between commodity markets and financial markets in one way or another. The majority of the studies in this discipline have focused on the volatility spillover between crude oil and key financial markets (see, inter alia, Arouri et al 2011;Guesmi and Fattoum 2014;Khalfaoui et al 2015;Delcoure and Singh 2018;Hammoudeh et al 2013;Kumar et al 2012;Sadorsky 2012). A fundamental consensus from these studies is that oil price shocks have significant time-varying impacts on the relationship between oil markets and equity markets.…”

Section: Introductionmentioning

confidence: 99%

Dynamic Spillovers between Gulf Cooperation Council’s Stocks, VIX, Oil and Gold Volatility Indices

Alqahtani

Chevallier

2020

JRFM

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This paper analyzes the conditional correlations between the stock market returns of countries that are members of the Gulf Cooperation Council (GCC). The innovative aspects of the paper consist of focusing on three volatility indices: the oil (OVX), gold (GVZ), and S&P500 (VIX) markets (considered in log-difference). We use weekly data and resort to DCC-GARCH modeling. The novelty of the paper consists in revealing that: (i) GCC stock market returns are negatively correlated with each of the volatility measures, and the correlations are stronger during crisis periods; (ii) GCC stock returns are mostly correlated with oil shocks; and (iii) Saudi Arabia and Qatar are the most responsive to all shocks among the GCC countries, while Bahrain correlates weakly to shocks in oil, gold, and VIX. The most striking results feature extra sensitivity of Saudi Arabia and Qatar in terms of volatility indices, which should be the foremost concern of policymakers and banking analysts.

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Analyzing volatility spillovers and hedging between oil and stock markets: Evidence from wavelet analysis

Cited by 235 publications

References 39 publications

The oil price crash in 2014/15: Was there a (negative) financial bubble?

The oil price crash in 2014/15: Was there a (negative) financial bubble?

Oil Prices and Stock Markets: A Review of the Theory and Empirical Evidence

Dynamic Spillovers between Gulf Cooperation Council’s Stocks, VIX, Oil and Gold Volatility Indices

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