Volatility Transmissions between Oil Prices and Emerging Market Sectors: Implications for Portfolio Management and Hedging Strategies

Sercan Demiralay and Hatice Gaye Gencer
Additional contact information
Hatice Gaye Gencer: Department of Business Administration, Faculty of Economics and Administrative Sciences, Yeditepe University, 34755, Istanbul, Turkey

International Journal of Energy Economics and Policy, 2014, vol. 4, issue 3, 442-447

Abstract: This paper investigates the mechanisms of return and volatility transmissions between oil prices and five emerging market sector returns. For the empirical method, we utilize a recent and novel technique: Vector Autoregressive-Asymmetric GARCH (VAR-AGARCH) model. We find some significant cross shock and volatility linkages between oil prices and the sectors. However, our results manifest that the sector indices are not affected equally or simultaneously by movements in oil prices. Additionally, we compute the optimal holding weights and hedge ratios for the two-asset portfolio consisting of oil and each sector index. Our empirical findings have potential implications for investors and portfolio managers.

Keywords: Emerging sector indices; oil prices; volatility transmission; optimal weights; hedge ratios (search for similar items in EconPapers)
JEL-codes: C32 G11 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.econjournals.com/index.php/ijeep/article/download/851/481 (application/pdf)
http://www.econjournals.com/index.php/ijeep/article/view/851/481 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eco:journ2:2014-03-13

Access Statistics for this article

International Journal of Energy Economics and Policy is currently edited by Ilhan Ozturk

More articles in International Journal of Energy Economics and Policy from Econjournals
Bibliographic data for series maintained by Ilhan Ozturk ().