Identifying the risk-return tradeoff and exploring the dynamic risk exposure of country portfolio of the FSU's oil economies

Xiaolei Sun, Jianping Li, Ling Tang and Dengsheng Wu

Economic Modelling, 2012, vol. 29, issue 6, 2494-2503

Abstract: Country risk not only reflects the overall risk of a given economy but also offers other more comprehensive risk information for stakeholders' decision-making. Different from previous studies focusing on oil import portfolio risk, this paper expands the scope of risk exposure from the micro risk of import portfolio to the macro risk of country portfolio, and puts forward a two-step framework to analyze the risk exposure when importing oil from the FSU region. Firstly, the paper analyzes the risk-return tradeoff of the FSU compared with the Middle East. Secondly, the country portfolio perspective is used from a macro risk perspective, and then an extension of the Value-at-Risk model which is incorporated time-varying conditional volatility mode is adopted to describe the dynamic risk of country portfolio. Empirical results show that increasing energy imports from the FSU is an effective way for China to balance risk from the high import dependence on the Middle East, but China faces more significant risk exposure of country portfolio comprised of FSU's oil economies than EU does.

Keywords: Oil economy; Risk-return tradeoff; Country risk; Country portfolio; Risk exposure (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0264999312002234
Full text for ScienceDirect subscribers only

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:eee:ecmode:v:29:y:2012:i:6:p:2494-2503

DOI: 10.1016/j.econmod.2012.07.002

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Catherine Liu ().