Assessing volatility transmission between Brent and stocks in the major global oil producers and consumers – the multiscale robust quantile regression

Dejan Živkov (), Slavica Manić (), Jelena Kovačević () and Željana Trbović ()
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Dejan Živkov: University of Novi Sad
Slavica Manić: University of Belgrade
Jelena Kovačević: ‘LEMIT’ company
Željana Trbović: EDUKONS University

Portuguese Economic Journal, 2022, vol. 21, issue 1, No 6, 67-93

Abstract: Abstract This paper investigates the volatility transmission effect between Brent oil futures and stock markets in the major global oil producing and consuming countries – the U.S., Russia, China and Saudi Arabia. In that process, we employ a mixture of novel and elaborate methodologies – wavelet signal decomposing procedure, GARCH model with complex distribution and recently developed robust quantile regression. Our results indicate that the effect is stronger in short-term horizon than in midterm and long-term in most cases. The magnitude is much stronger in turbulent times, whereas in tranquil times, this effect is very weak. We find that Russian RTS index endures the strongest volatility transmission effect from oil market. Surprisingly, Saudi stock market does not suffer heavy spillover effect even in the periods of increased market unrest. In the U.S. and China, the effect is much stronger from stocks to oil than vice-versa, and this particularly applies for the U.S. case.

Keywords: Volatility spillover effect; Oil and stock markets; Wavelets; Robust quantile regression; C14; C63; G12; Q02 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s10258-020-00189-x

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