Time-Varying Correlation Between Oil and Stock Market Volatilities: Evidence From Oil-Importing and Oil-Exporting Countries

MPRA Paper No. 80435

36 Pages Posted: 26 Oct 2018

See all articles by Rustam Boldanov

Rustam Boldanov

Bournemouth University

Stavros Antonios Degiannakis

Department of Economic and Regional Development, Panteion University of Political and Social Sciences

George N. Filis

Bournemouth University

Date Written: 2017

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

JEL Classification: C32, C51, G15, Q40

Suggested Citation

Boldanov, Rustam and Degiannakis, Stavros Antonios and Filis, George N., Time-Varying Correlation Between Oil and Stock Market Volatilities: Evidence From Oil-Importing and Oil-Exporting Countries (2017). MPRA Paper No. 80435, Available at SSRN: https://ssrn.com/abstract=3259839

Rustam Boldanov

Bournemouth University ( email )

Fern Barrow
Poole BH12 5BB, Dorset BH8 8EB
United Kingdom

Stavros Antonios Degiannakis (Contact Author)

Department of Economic and Regional Development, Panteion University of Political and Social Sciences ( email )

136 Sygrou
Athens
Greece

George N. Filis

Bournemouth University ( email )

Fern Barrow
Poole BH12 5BB, Dorset BH8 8EB
United Kingdom

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