Time-varying correlation between oil and stock market volatilities: Evidence from oil-importing and oil-exporting countries

Rustam Boldanov, Stavros Degiannakis and George Filis

MPRA Paper from University Library of Munich, Germany

Abstract: This paper investigates the time-varying conditional correlation between oil price and stock market volatility for six major oil-importing and oil-exporting countries. The period of the study runs from January 2000 until December 2014 and a Diag-BEKK model is employed. Our findings report the following regularities. (i) The correlation between the oil and stock market volatilities changes over time fluctuating at both positive and negative values. (ii). Heterogeneous patterns in the time-varying correlations are evident between the oil-importing and oil-exporting countries. (iii) Correlations are responsive to major economic and geopolitical events, such as the early-2000 recession, the 9/11 terrorist attacks and the global financial crisis of 2007-2009. These findings are important for risk management practices, derivative pricing and portfolio rebalancing.

Keywords: conditional volatility; realized volatility; time-varying correlation; Diag-BEKK; GARCH; oil-importing countries; oil-exporting countries. (search for similar items in EconPapers)
JEL-codes: C32 C51 G15 Q40 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-ene and nep-rmg
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Published in International Review of Financial Analysis 48 (2017): pp. 209-220

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https://mpra.ub.uni-muenchen.de/96277/1/MPRA_paper_80435.pdf revised version (application/pdf)

Related works:
Journal Article: Time-varying correlation between oil and stock market volatilities: Evidence from oil-importing and oil-exporting countries (2016)
Working Paper: Time-varying correlation between oil and stock market volatilities: Evidence from oil-importing and oil-exporting countries (2015)
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