Does the Choice of the Multivariate GARCH Model on Volatility Spillovers Matter? Evidence from Oil Prices and Stock Markets in G7 Countries

Authors

  • Dimitrios Kartsonakis-Mademlis University of Macedonia
  • Nikolaos Dritsakis University of Macedonia

Abstract

In this paper, we employ asymmetric multivariate GARCH approaches to examine their performance on the volatility interactions between global crude oil prices and seven major stock market indices. Insofar as volatility spillover across these markets is a crucial element for portfolio diversification and risk management, we also examine the optimal weights and hedge ratios for oil-stock portfolio holdings with respect to the results. Our findings highlight the superiority of the asymmetric BEKK model and the fact that the choice of the model is of crucial importance given the conflicting results we got. Finally, our results imply that oil assets should be a part of a diversified portfolio of stocks as they increase the risk-adjusted performance of the hedged portfolio.Keywords: Asymmetry, Multivariate GARCH, Stock market, Oil price, Volatility SpilloverJEL Classifications: C32, F3, G15, Q4DOI: https://doi.org/10.32479/ijeep.9469

Downloads

Download data is not yet available.

Downloads

Published

2020-08-10

How to Cite

Kartsonakis-Mademlis, D., & Dritsakis, N. (2020). Does the Choice of the Multivariate GARCH Model on Volatility Spillovers Matter? Evidence from Oil Prices and Stock Markets in G7 Countries. International Journal of Energy Economics and Policy, 10(5), 164–182. Retrieved from https://econjournals.com.tr/index.php/ijeep/article/view/9469

Issue

Vol. 10 No. 5 (2020)

Section

Articles

License

Submission of an article implies that the work described has not been published previously , that it is not under consideration for publication elsewhere, that its publication is approved by all authors and tacitly or explicitly by the responsible authorities where the work was carried out, and that, if accepted, will not be published elsewhere in the same form, without the written consent of the Publisher. The Editors reserve the right to edit or otherwise alter all contributions, but authors will receive proofs for approval before publication.