Analysing spillover between returns and volatility series of oil across major stock markets. (3rd November 2020)

• Record Type: Journal Article
• Authors: Tiwari, Aviral Kumar; Nasreen, Samia; Ullah, Subhan; Shahbaz, Muhammad
• Is Part Of: International journal of finance & economics. Volume 26:Number 2(2021)
• Page Start: 2458
• Page End: 2490
• Publication Date: 2020-11-03
• Subjects: connectedness -- generalized variance decomposition -- information flow -- oil‐stock relationship; International finance -- Periodicals; Economics -- Periodicals; 332
• DOI: 10.1002/ijfe.1916
• Languages: English
• ISSNs: 1076-9307

Abstract

Abstract: Applying recently developed Diebold and Yilmaz (2012) spillover index, this paper investigates the oil–stocks returns and volatility connectedness with weekly data between January 14, 2000 and March 31, 2017. For the purpose of robustness, we have both used WTI and Brent oil prices. Sensitivity of overall spilover index is also examined using different lag‐structures and different forecast horizons. The empirical results are qualitatively similar either when WTI or Brent oil prices are used to examine the spillover amongst series under consideration. Specifically, the spillover index value for WTI and Brent, respectively, is 71.60 and 72.32%. We show that total spillover connectedness, as measured by a rolling‐window approach, has dynamic and volatile characteristics in returns and volatility series across major markets. Last but not least, we find from the net spillover analysis that NYK, SPTSX, IBOV, MICEX, SENSEX, Shanghai, TOP40 and WTI stock markets are net receiver of return spillover, whereas SPX, DAX, UKX, FTSEMIB and CAC40 are the net contributors.