The Crude Oil–Stock Market Dependence and Its Determinants: Evidence from Emerging Economies

Wen, Xiaoqian; Bouri, Elie; Cheng, Hua

doi:10.1080/1540496x.2018.1522247

Cited by 33 publications

(19 citation statements)

References 38 publications

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“…The pairwise conditional correlation between the clean energy stock index (green bond index) and each of the two dirty energy assets is measured via the application of the corrected DCC-GARCH model [18]. Then, dynamic portfolio implications are studied via examining time-varying hedge Energies 2020, 13, 3141 4 of 17 ratios [33] and hedging effectiveness [20,34]. Finally, the authors uncover the drivers of the hedge portfolio returns [20].…”

Section: Methodsmentioning

confidence: 99%

“…Then, dynamic portfolio implications are studied via examining time-varying hedge Energies 2020, 13, 3141 4 of 17 ratios [33] and hedging effectiveness [20,34]. Finally, the authors uncover the drivers of the hedge portfolio returns [20].…”

Section: Methodsmentioning

confidence: 99%

“…There is a large literature on the relationships between dirty energy prices, especially crude oil prices, and stock market indices (see, among others [21][22][23]), with some evidence on the ability of crude oil prices to hedge the downside risk of stock market indices [20,[24][25][26]. However, less evidence exists on the hedging abilities of green bonds and clean energy stocks against dirty energy investments and the portfolio implications in term of hedge ratios, hedging effectiveness, and the drivers of the hedge portfolio returns.…”

Section: Related Studiesmentioning

confidence: 99%

“…The time-varying effectiveness of the hedging is assessed using the measure of Dale [34] and Batten et al [20] as follows:…”

Section: Hedging Effectivenessmentioning

confidence: 99%

“…Thirdly, the current study conducts practical portfolio analyses through examining hedge ratios and hedging effectiveness [19] in a time-varying setting, which is very appreciated by academics and investors. Fourthly, the current study determines the drivers of the hedge portfolio returns [20], which has not so far been examined in the literature dealing with the hedging abilities of clean energy stocks or green bonds. By studying the effect of some economic and financial variables, the authors extend the limited understanding of the factors affecting uncertainty in the relationship between clean (green) and dirty energy assets [8,11,13,15,16].…”

Section: Introductionmentioning

confidence: 99%

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Hedging Strategies of Green Assets against Dirty Energy Assets

2020

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Previous studies argue that the relationships between clean/green and dirty energy assets are time-varying, but there is a lack of evidence on the hedging ability of clean energy stocks and green bonds for dirty assets, such as crude oil and an energy stock index exchange traded fund (ETF), and the portfolio implications. Furthermore, potential drivers of the dynamics of the hedge portfolio returns are still unknown. To address these research gaps, the authors provide an extensive analysis of the hedging ability of clean/green assets against two dirty energy assets (crude oil prices and energy ETF) using daily data from 3 January 2012 to 29 November 2019. Using corrected dynamic conditional correlation models, the authors model correlation and then compute hedge ratios and hedging effectiveness, which all seem to vary with time. The results from hedging effectiveness indicate that investors should follow a dynamic hedging strategy and that clean energy stocks are more effective hedge than green bonds, especially for crude oil. The application of regression analyses shows that the implied volatilities of US equities and crude oil as well as US dollar index have a negative impact on the hedge portfolio returns, whereas gold prices and inflation have a positive impact.

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Section: Methodsmentioning

confidence: 99%

Section: Methodsmentioning

confidence: 99%

Section: Related Studiesmentioning

confidence: 99%

“…The time-varying effectiveness of the hedging is assessed using the measure of Dale [34] and Batten et al [20] as follows:…”

Section: Hedging Effectivenessmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Hedging Strategies of Green Assets against Dirty Energy Assets

2020

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Oil price volatility and stock returns: Evidence from three oil‐price wars

Khan

Ahmed

Mughal³

et al. 2022

Int. J Fin Econ

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This study examines how crude oil price volatility affected the stock returns of major global oil and gas corporations during three major oil-price wars that took place between October 1991 and June 2020. Episodes considered include the 1998 Saudi Arabia-Venezuela war, the 2014-16 conflict and the 2020 Saudi Arabia-Russia war in a time of unprecedented crisis caused by the COVID-19 pandemic. Our findings reveal a significant evidence for volatility persistence and leverage effects in oil price during the three oil-price wars. These findings are consistent for WTI as well as Brent crude oil specifications. Though the persistence of volatility is similar to that of the previous two oilprice wars, the 2020 Saudi Arabia-Russia oil-price war has higher volatility spikes than the previous two wars. Besides, oil price shocks have a significant and positive effect on the returns of oil and gas companies. These findings provide information on how volatility in global oil prices is also sensitive to irregular events such as price wars between oil producers. This information can be important for economic agents contemplating shorter hedges by managing risks during times of high volatility.

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