Spillover and portfolio analysis for oil and stock market: A new insight across financial crisis, COVID-19 and Russian-Ukraine war

Lei Lei, Ghazala Aziz, Suleman Sarwar, Rida Waheed and Aviral Tiwari

Resources Policy, 2023, vol. 85, issue PA

Abstract: This research examines the link between the volatility of the Karachi Stock Exchange and West Texas Intermediate (WTI) crude oil, using daily data between July 1, 2001 and December 31, 2022. We further investigate the spillover and investment strategies variation across the financial crisis, COVID-19, and the Russian-Ukrainian conflict. We employ the well-known investment analysis; portfolio weights, hedge ratio and hedging effectiveness. We extract the estimates from symmetric and asymmetric GARCH approaches for investment analysis. Asymmetric GARCH provides the response of negative and positive shocks. The findings demonstrate that lagged volatility, rather than lagged shocks, is a better predictor of market volatility in the future. Furthermore, the data support the notion that shocks, and volatility are communicated for the case of before, during, and after the crisis. After the outbreak of COVID-19 and the subsequent Russian-Ukraine war, researchers have discovered a transmission of shock and volatility from oil to stock markets. For policy suggestions, we recommend that oil revenue might be used to cushion other investment losses. After COVID-19 and the Russian-Ukraine war, investors should buy oil assets to hedge their portfolios against the ensuing catastrophe. However, the policy suggestions arising from the study findings may be employed by investors and portfolio managers.

Keywords: Volatility spillovers; GARCH model; Hedge ratios; Crisis; COVID-19; Russia-Ukraine war (search for similar items in EconPapers)
JEL-codes: F65 G11 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0301420723003562
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:jrpoli:v:85:y:2023:i:pa:s0301420723003562

DOI: 10.1016/j.resourpol.2023.103645

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 Catherine Liu ().