Open AccessVolatility Spillovers Between Oil Prices And Stock Returns: A Focus On Frontier Markets
Author(s) -
Mathieu Gomes,
Anissa Chaibi
Publication year - 2014
Publication title -
journal of applied business research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.149
H-Index - 22
eISSN - 2157-8834
pISSN - 0892-7626
DOI - 10.19030/jabr.v30i2.8421
Subject(s) - volatility (finance) , economics , stock (firearms) , financial economics , portfolio , frontier , bivariate analysis , equity (law) , spillover effect , autoregressive conditional heteroskedasticity , financial market , econometrics , monetary economics , finance , macroeconomics , mechanical engineering , statistics , mathematics , archaeology , political science , law , engineering , history
Frontier markets are increasingly sought by investors in search of higher returns and low correlation with traditional assets. As such, it is important for financial market participants to understand the volatility transmission mechanism across these markets in order to make better portfolio allocation decisions. This paper employs a bivariate BEKK-GARCH(1,1) model to simultaneously estimate the mean and conditional variance between equity stock markets (twenty-one national frontier stock indices and two broad indices the MSCI Frontier Markets and the MSCI World) and oil prices. We examine weekly returns from February 8, 2008 to February 1, 2013 and find significant transmission of shocks and volatility between oil prices and some of the examined markets. Moreover, this spillover effect is sometimes bidirectional.