Investigation volatility spillovers between oil market and stock index return

Subject Areas : Journal of Investment Knowledge

Mohammad Hashem Botshekan ¹ , Hosein Mohseni ²

1 - Assiatant Professor, Allameh Tabataba’i University, (Corresponding Author)
2 - Ph.D. in finance, Allameh Tabataba’i University,

Received: 2017-05-16 Accepted : 2017-05-30 Published : 2018-03-21

Keywords: Volatility Spillover, Dynamic conditional correlatio, oil market, stock index,

Abstract :

Today, addressing the issue of volatility spillovers in different markets and their relationship with each other, in terms of its use in the prediction of shocks and crises, is an important issue in empirical finance research. Volatility Spillover indicate data transfer process and the flow of capital between markets.This paper investigate the dynamic conditional correlation and Volatility Spillover among returns of crude oil price and stock index by using Baba, engel, kroner and Kraft (BEKK), constant conditional correlation (CCC), dynamic conditional correlation (DCC) and multivariate GARCH model (VARMA-AGARCH) for 144 monthly data up to 2016.The aim of this study is identifing the effect of important external shocks such as oil price to stock index fluctuations in order to used for financial flactuations management, investment decisions and risk management. The results indicate a conditional correlation of volatility in the short term and the spillover effects of the oil price on the stock index.    

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