Analyzing volatility spillovers between oil market and Asian stock markets. (June 2020)

• Record Type: Journal Article
• Authors: Sarwar, Suleman; Tiwari, Aviral Kumar; Tingqiu, Cao
• Is Part Of: Resources policy. Volume 66(2020)
• Publication Date: 2020-06
• Subjects: BEKK-GARCH -- Volatility spillover -- Crude oil prices -- Stock prices; Q43 -- G01; Mines and mineral resources -- Periodicals; Ressources minérales -- Périodiques; Ressources naturelles -- Gestion -- Périodiques; Environnement -- Politique gouvernementale -- Périodiques; 333.8
• DOI: 10.1016/j.resourpol.2020.101608
• Languages: English
• ISSNs: 0301-4207

Abstract

Abstract: The paper attempts to investigate the volatility spillover between oil and stock markets returns (namely Karachi, Shanghai and Bombay) by using bivariate BEKK-GARCH model covering the period from 1997 to 2014. Further, the data is divided before crisis and after crisis period to capture the role of volatility spillover across different economic scenarios. The findings have confirmed the significant role of historical shocks and volatility of one market on current volatility of the market itself in all three oil and stock markets. Overall, the volatility spillover between oil and stock market has confirmed the bidirectional spillover in Karachi stock market, unidirectional in case of Shanghai stock market, whereas, Bombay stock market has confirmed mixed evidences. These results have confirmed the first strand of the paper that there exists a spillover between oil and stock markets. The second strand of the paper discuss the spillover before and after the crisis period, the results have not shown significant differences between the two periods. Interestingly, the estimated results vary across data frequencies used; daily, weekly and monthly. Highlights: Investigate the volatility spillover of oil market and stock market returns by using bivariate BEKK-GARCH model. The past shocks and volatility of one market depends on current volatility of the market itself in all the markets. We confirm bidirectional spillover in case of Karachi, unidirectional in Shanghai, mixed evidence in Bombay stock market. These results have confirmed the first strand of the paper that there exists a spillover between oil and stock markets. The estimated results vary across data frequencies; daily, weekly and monthly based data.