Economics at your fingertips  

Volatility spillovers and hedging: Evidence from Asian oil-importing countries

Suleman Sarwar, Rabeh Khalfaoui, Rida Waheed and Hamidreza Ghorbani Dastgerdi

Resources Policy, 2019, vol. 61, issue C, 479-488

Abstract: In this study the volatility spillover between stock market returns (Shanghai stock exchange, Nikkei stock exchange and Bombay stock exchange) and crude oil returns in the top three Asian oil-importing countries are investigated. BEKK-GARCH, DCC-GARCH, cDCC-GARCH and GO-GARCH estimation techniques are applied using daily data from 1st January 2000 to December 27th, 2016. Further, these estimation results are used to analyze the optimal portfolio weights and hedge ratios for oil-stock portfolios. The findings reveal that shocks dependence and conditional volatility in its own market have more important role than volatility spillover. Also, the bidirectional spillover is confirmed between Nikkei stock return and oil returns. The unidirectional spillover from Indian stock returns to oil returns. There is, however, no evidence of volatility spillover in case of China. According to optimal portfolio weights and hedge ratios, the oil assets are useful instrument to minimize the portfolio risk in studied markets. The investors, however, should choose more stocks than oil assets to form an optimal portfolio. We also notice that the cDCC-GARCH model is better for risk minimization.

Keywords: Stock market returns; Oil prices; Volatility spillover; Portfolio; Hedge ratio (search for similar items in EconPapers)
JEL-codes: F65 G11 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
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:

Access Statistics for this article

Resources Policy is currently edited by R. G. Eggert

More articles in Resources Policy from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2019-08-24
Handle: RePEc:eee:jrpoli:v:61:y:2019:i:c:p:479-488