Volatility Transmission in Crude Oil, Gold, Standard and Poor s 500 and US Dollar Index Futures using Vector Autoregressive Multivariate Generalized Autoregressive Conditional Heteroskedasticity Model

Tanattrin Bunnag ()

International Journal of Energy Economics and Policy, 2016, vol. 6, issue 1, 39-52

Abstract: This paper examined volatility transmission in the crude oil, gold, S and P 500 and US Dollar Index futures. The data used in this study was the daily data from 2010 to 2015. The four vector autoregressive (VAR)-multivariate generalized autoregressive conditional heteroskedasticity models, namely the VAR (2)-diagonal VECH, the VAR (2)-diagonal Baba, Engle, Kraft and Kroner (BEKK), the VAR (2)-constant conditional correlations (CCC) and the VAR (2)-dynamic conditional correlation (DCC), were employed. The empirical results showed that the estimates of the VAR (2)-diagonal BEKK parameters were statistically significant in all cases. Later, the VAR (2)-diagonal VECH parameter were statistically significant in case of returns of crude oil (RCRUDE) with returns of gold futures (RGOLD), RGOLD with returns of Standard and Poor s 500 (S and P 500) futures (RSP) and RSP with returns of US Dollar Index (RUSD). At the same time the VAR (2)-CCC parameters were statistically significant in only case of RCRUDE with RGOLD. Finally, the VAR (2)-DCC were statistically significant in case of RCRUDE with RGOLD, RGOLD with RSP, RGOLD with RUSD and RSP with RUSD. In addition, we could conclude that the crude oil futures volatility was having an impact on the gold futures volatility, the gold futures volatility was having an impact on S and P 500 futures volatility, the gold futures volatility was having an impact on US Dollar Index futures volatility and S and P 500 futures volatility was having an impact on US Dollar Index futures volatility

Keywords: Volatility Transmission, crude oil futures; gold futures; S&P 500 futures; US Dollar Index futures; VAR-MGARCH (search for similar items in EconPapers)
JEL-codes: C13 C32 G13 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:eco:journ2:2016-01-07

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