tailieunhanh - Does the choice of the multivariate GARCH model on volatility spillovers matter? Evidence from oil prices and stock markets in G7 countries

In this paper, 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. | 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 ISSN 2146-4553 available at http International Journal of Energy Economics and Policy 2020 10 5 164-182. Does the Choice of the Multivariate GARCH Model on Volatility Spillovers Matter Evidence from Oil Prices and Stock Markets in G7 Countries Dimitrios Kartsonakis-Mademlis Nikolaos Dritsakis University of Macedonia Greece. Email Received 20 February 2020 Accepted 03 June 2020 DOI https 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 Spillover JEL Classifications C32 F3 G15 Q4 1. INTRODUCTION of how shocks and volatility are transmitted across markets over time. Also the increased financial integration between countries Over the past years the stock markets and crude oil markets have and the financialization of oil markets can enhance the ways of developed a reciprocal relationship. Every production sector in the diversification of investors portfolios. In order to take advantage international economy depends on