 Oil and stock market volatility: A multivariate stochastic volatility perspectiveMinh Vo Energy Economics, 2011, vol. 33, issue 5, 956-965 Abstract: This paper models the volatility of stock and oil futures markets using the multivariate stochastic volatility structure in an attempt to extract information intertwined in both markets for risk prediction. It offers four major findings. First, the stock and oil futures prices are inter-related. Their correlation follows a time-varying dynamic process and tends to increase when the markets are more volatile. Second, conditioned on the past information, the volatility in each market is very persistent, i.e., it varies in a predictable manner. Third, there is inter-market dependence in volatility. Innovations that hit either market can affect the volatility in the other market. In other words, conditioned on the persistence and the past volatility in their respective markets, the past volatility of the stock (oil futures) market also has predictive power over the future volatility of the oil futures (stock) market. Finally, the model produces more accurate Value-at-Risk estimates than other benchmarks commonly used in the financial industry. Keywords: Multivariate; stochastic; volatility; Oil; prices; Stock; market; MCMC (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:33:y:2011:i:5:p:956-965 Access Statistics for this article Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant More articles in Energy Economics from Elsevier |
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