EconPapers    
Economics at your fingertips  
 

On the impacts of oil price fluctuations on European equity markets: Volatility spillover and hedging effectiveness

Mohamed Arouri (), Jamel Jouini and Duc Khuong Nguyen

Energy Economics, 2012, vol. 34, issue 2, 611-617

Abstract: The objective of this paper is to investigate the volatility spillovers between oil and stock markets in Europe. As not all industries are expected to be equally affected by oil price changes, we conduct our study at both the aggregate as well as sector levels. Empirically, we make use of a recently developed VAR–GARCH approach which allows for transmissions in volatilities. In addition, we analyze the optimal weights and hedge ratios for oil–stock portfolio holdings based on our results. On the whole, our findings show significant volatility spillovers between oil price and sector stock returns, and suggest that a better understanding of those links is crucial for portfolio management in the presence of oil price risk.

Keywords: Sector returns; Oil prices; Hedge ratios; VAR–GARCH models (search for similar items in EconPapers)
JEL-codes: F3 G12 Q43 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (208) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0140988311001691
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:eneeco:v:34:y:2012:i:2:p:611-617

DOI: 10.1016/j.eneco.2011.08.009

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
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2021-07-18
Handle: RePEc:eee:eneeco:v:34:y:2012:i:2:p:611-617