Shock and Volatility Spillovers between Crude Oil Price and Stock Returns: Evidence for Thailand

11 Pages Posted: 23 Mar 2020 Last revised: 11 Oct 2021

See all articles by Krit Theplib

Krit Theplib

National Institute of Development Administration

Yuthana Sethapramote

National Institute of Development Administration (NIDA)

Komain Jiranyakul

National Institute of Development Administration

Date Written: February 26, 2020

Abstract

This paper employs a bivariate BEKK-GARCH(1,1) model to examine shock and volatility spillovers between crude oil and stock markets by taking into account the impact of the 2008 global financial crisis. Daily data from the crude oil market and the Thai stock market during February 6, 2004 and September 14, 2015 are used. The whole sample is divided into the pre-and post-crisis periods. The results show that there are no spillover effects between oil price and stock returns in the pre-crisis period. In the post-crisis period, there are unilateral spillover effects from oil price to some equity sector returns. In the market, unilateral spillovers of shock and volatility from oil price to stock market return are observed. The findings in this paper are crucial for financial market participations to understand shock and volatility transmissions from oil to stock markets such that portfolio management should take into account the presence of oil price risk.

Keywords: Stock Returns, Oil Price Shock, Volatility Spillover, Bivariate GARCH, emerging stock market

JEL Classification: G12, Q43

Suggested Citation

Theplib, Krit and Sethapramote, Yuthana and Jiranyakul, Komain, Shock and Volatility Spillovers between Crude Oil Price and Stock Returns: Evidence for Thailand (February 26, 2020). Available at SSRN: https://ssrn.com/abstract=3544541 or http://dx.doi.org/10.2139/ssrn.3544541

Krit Theplib

National Institute of Development Administration ( email )

Bangkok, 10240

Yuthana Sethapramote

National Institute of Development Administration (NIDA) ( email )

118 Seri Thai Road
Bangkok, 10240
Thailand

Komain Jiranyakul (Contact Author)

National Institute of Development Administration ( email )

118 Seri Thai Road
Bangkok, 10240
Thailand

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