Can stock market investors hedge energy risk? Evidence from Asia

Jonathan Batten, Harald Kinateder, Peter Szilagyi and Niklas Wagner

Energy Economics, 2017, vol. 66, issue C, 559-570

Abstract: ​The relationship between energy and stock prices is investigated in the context of Asia, including China and Japan. Oil, gas and coal prices are considered both individually and as an energy portfolio. Consistent with evidence from international markets, during the post Global Financial Crisis (GFC) period, Asian stock markets moved in tandem with oil prices. However, using asset pricing and portfolio theory, we identify a time-varying integration between individual stock markets and the energy portfolio, which in turn may limit the benefit of risk reduction through diversification. This relation can also be used to hedge the common factor arising from energy risk. Doing so provides benefits to investors in the form of positive time-varying risk adjusted returns.

Keywords: Coal; Commodities; Financial market integration; Gas; International asset pricing; Oil; Systematic risk; Market risk (search for similar items in EconPapers)
JEL-codes: F15 F2 F36 G10 G15 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (47)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:66:y:2017:i:c:p:559-570

DOI: 10.1016/j.eneco.2016.11.026

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