Volatility and Spillover Effects between Central–Eastern European Stock Markets and Energy Markets: An Emphasis on Crisis Periods

Octavian Jude, Avraham Turgeman, Claudiu Boțoc and Laura Raisa Miloș ()
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Octavian Jude: Department of Finance, Faculty of Economics and Business Administration, West University of Timisoara, 16 Pestalozzi Str., 300115 Timisoara, Romania
Avraham Turgeman: Department of Finance, Faculty of Economics and Business Administration, West University of Timisoara, 16 Pestalozzi Str., 300115 Timisoara, Romania
Claudiu Boțoc: Department of Finance, Faculty of Economics and Business Administration, West University of Timisoara, 16 Pestalozzi Str., 300115 Timisoara, Romania
Laura Raisa Miloș: Department of Finance, Faculty of Economics and Business Administration, West University of Timisoara, 16 Pestalozzi Str., 300115 Timisoara, Romania

Energies, 2023, vol. 16, issue 17, 1-12

Abstract: The objective of this paper is to study the spillover effects between energy markets and stock markets with emphasis on the significant crisis periods of the last 15 years, the period of the financial crisis that officially started in 2008, the pandemic period, generically called COVID-19, and the recent confrontation in Eastern Europe. Understanding the volatility transmission mechanisms between the energy and capital markets and also from the energy markets back and the spillover effects that result is very important. We use multivariate GARCH models to highlight a spillover effect between energy commodities and equities in Central and Eastern Europe. The highest correlations are recorded for CEE stock markets with electricity and Brent, and the lowest for CEE stock markets with gas. The biggest symmetric shocks between energy and CEE stock markets occurred during the COVID-19 pandemic. In contrast, the biggest asymmetric shocks occurred during the financial crisis (for gas) and the Ukrainian invasion (for Brent). We also find that volatility is more sensitive to its lagged values in the marketplace than it is to new information. The impact and contagion of shocks caused by the oil market are greater than those of other energy markets.

Keywords: volatility; energy; stock markets; spillover; multivariate GARCH (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2023
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