The relationship between energy and equity markets: evidence from volatility impulse response functions
Eric Olson
Andrew Vivian
Mark Wohar
2134/24284
https://repository.lboro.ac.uk/articles/journal_contribution/The_relationship_between_energy_and_equity_markets_evidence_from_volatility_impulse_response_functions/9502121
This paper examines the relationship between the energy and equity markets by estimating volatility impulse response functions from a multivariate BEKK model of the Goldman Sach's Energy Index and the S&P 500; in addition, we also calculate the time varying conditional correlations and time varying dynamic hedge ratios. From volatility impulse response functions, we find that low S&P 500 returns cause substantial increases in the volatility of the energy index; however, we find only a weak response from S&P 500 volatility to energy price shocks. Moreover, our dynamic hedge ratio analysis suggests that the energy index is generally a poor hedging instrument.
2017-03-03 11:32:10
Volatility impulse response functions
Dynamic hedge ratios
Volatility spillovers
Conditional correlation
Commodity market
Equity index