The relationship between energy and equity markets: Evidence from volatility impulse response functions

Eric Olson (), Andrew J. Vivian and Mark Wohar ()

Energy Economics, 2014, vol. 43, issue C, 297-305

Abstract: This paper examines the relationship between the energy and equity markets by estimating volatility impulse response functions from a multivariate BEKK model of the Goldman Sach's Energy Index and the S&P 500; in addition, we also calculate the time varying conditional correlations and time varying dynamic hedge ratios. From volatility impulse response functions, we find that low S&P 500 returns cause substantial increases in the volatility of the energy index; however, we find only a weak response from S&P 500 volatility to energy price shocks. Moreover, our dynamic hedge ratio analysis suggests that the energy index is generally a poor hedging instrument.

Keywords: Volatility impulse response functions; Dynamic hedge ratios; Volatility spillovers; Conditional correlation; Commodity market; Equity index (search for similar items in EconPapers)
JEL-codes: C12 C32 G10 Q00 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (76)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:43:y:2014:i:c:p:297-305

DOI: 10.1016/j.eneco.2014.01.009

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