Spillovers across the Asian OPEC+ Financial Market

Darko B. Vuković (), Senanu Dekpo-Adza, Vladislav Khmelnitskiy and Mustafa Özer
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Darko B. Vuković: International Laboratory for Finance and Financial Markets, Faculty of Economics, People’s Friendship University of Russia (RUDN University), Miklukho-Maklaya Str. 6, Moscow 117198, Russia
Senanu Dekpo-Adza: St. Petersburg School of Economics and Management, HSE University, Kantemirovskaya 3A, Office 331, Sankt Petersburg 194100, Russia
Vladislav Khmelnitskiy: St. Petersburg School of Economics and Management, HSE University, Kantemirovskaya 3A, Office 331, Sankt Petersburg 194100, Russia
Mustafa Özer: Department of Economics, Faculty of Economics and Administrative Sciences, Anadolu University, Eskişehir 26470, Turkey

Mathematics, 2023, vol. 11, issue 18, 1-23

Abstract: This research utilizes the Diebold and Yilmaz spillover model to examine the correlation between geopolitical events, natural disasters, and oil stock returns in Asian OPEC+ member countries. The study extends prior research by investigating the dynamics of the Asian OPEC+ oil market in light of recent exogenous events. The analysis commences by creating a self-generated Asian OPEC+ index, which demonstrates significant volatility, as indicated by GARCH (1, 1) model estimation. The results obtained from the Diebold and Yilmaz spillover test indicate that, on average, there is a moderate degree of connectedness among the variables. However, in the event of global-level shocks or shocks specifically affecting Asian OPEC+ countries, a heightened level of connectedness is found. Prominent instances of spillover events observed in the volatility analysis conducted during the previous decade include the COVID-19 pandemic, the conflict between Russia and Ukraine, and the Turkey earthquake of 2023. Based on the facts, it is recommended that investors take into account the potential risks linked to regions that are susceptible to natural calamities and geopolitical occurrences while devising their portfolios for oil stocks. The results further highlight the significance of integrating these aspects into investors’ decision-making procedures and stress the need for risk management tactics that consider geopolitical risks and natural disasters in the oil equity market.

Keywords: spillovers; Geopolitical Risk Index (GRI); Natural Disaster Index (NDI); non-member OPEC+ oil stock returns (NOPEC); Diebold and Yilmaz spillover index (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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