Analysing spillover between returns and volatility series of oil across major stock markets

Tiwari, A.; Nasreen, S.; Ullah, Subhan; Shahbaz, M.

Abstract

Applying recently developed Diebold and Yilmaz (2012) spillover index, this paper investigates the oil-stocks returns and volatility connectedness with weekly data between 2000/01/14-2017/03/31. For the purpose of robustness, we have both used WTI and Brent oil prices. Sensitivity of overall spilover index is also examined using different lag-structures and different forecast horizons. The empirical results are qualitatively similar either when WTI or Brent oil prices are used to examine the spillover among series under consideration. Specifically, the spillover index value for WTI and Brent, respectively, is 71.60% and 72.32%. We show that total spillover connectedness, as measured by a rolling-window approach, has dynamic and volatile characteristics in returns and volatility series across major markets. Last but not least, we find from the net spillover analysis that NYK, SPTSX, IBOV, MICEX, SENSEX, Shanghai, TOP40 and WTI stock markets are net receiver of return spillover, while SPX, DAX, UKX, FTSEMIB and CAC40 are the net contributors.

Citation

Tiwari, A., Nasreen, S., Ullah, S., & Shahbaz, M. (2021). Analysing spillover between returns and volatility series of oil across major stock markets. International Journal of Finance and Economics, 26(2), 2458-2490. https://doi.org/10.1002/ijfe.1916

• Journal Article Type: Article
• Acceptance Date: Jun 18, 2020
• Online Publication Date: Nov 3, 2020
• Publication Date: 2021-04
• Deposit Date: Jun 22, 2020
• Publicly Available Date: Nov 4, 2022
• Journal: International Journal of Finance and Economics
• Print ISSN: 1076-9307
• Electronic ISSN: 1099-1158
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 26
• Issue: 2
• Pages: 2458-2490
• DOI: https://doi.org/10.1002/ijfe.1916
• Keywords: generalized variance decomposition; connectedness; information flow; oil-stock relationship
• Public URL: https://nottingham-repository.worktribe.com/output/4699429
• Publisher URL: https://onlinelibrary.wiley.com/doi/abs/10.1002/ijfe.1916
• Additional Information: Received: 2018-11-06; Accepted: 2020-06-18; Published: 2020-11-03