Shock and Volatility Spillovers between Crude Oil Price and Stock Returns: Evidence for Thailand
11 Pages Posted: 23 Mar 2020
Date Written: February 26, 2020
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 crude oil market and the Thai stock market during February 6, 2004 and September 14, 2015 are used in the analyses. 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 level, there are unilateral spillovers of shock and volatility from oil price to stock market return. The findings in this paper are crucial for financial market participation 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
JEL Classification: G12, Q43
Suggested Citation: Suggested Citation