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The Relationship between Oil Price and OECD Stock Markets: A Multivariate Approach

Author

Listed:
  • Khaled GUESMI

    (IPAG LAB & EconomiX)

  • Salma FATTOUM

    (INSEEC BUSINESS SCHOOL)

Abstract

In this paper, we consider the models that provide evidence of volatility transmission between oil and equity markets. Our aim is to complement previous research by addressing the dynamics of volatility transmission by using the multivariate dynamic conditional correlation–GARCH (DCC-GARCH) model of Engle (2002). This model helps detect eventual volatility spillovers, which are typically observed in stock markets and oil prices. Our sample consists of monthly frequency stock indexes and oil prices covering 10 OECD countries for the January 1990–December 2012 period. We show that oil price shocks in periods of world turmoil and political events have an important impact on the relationship between oil and stock market prices.

Suggested Citation

  • Khaled GUESMI & Salma FATTOUM, 2014. "The Relationship between Oil Price and OECD Stock Markets: A Multivariate Approach," Economics Bulletin, AccessEcon, vol. 34(1), pages 510-519.
    • Handle: RePEc:ebl:ecbull:eb-13-00576
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    Cited by:

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    2. Leila Dagher & Ibrahim Jamali & Nasser Badra, 2020. "The Predictive Power of Oil and Commodity Prices for Equity Markets," World Scientific Book Chapters, in: Stéphane Goutte & Khaled Guesmi (ed.), Risk Factors and Contagion in Commodity Markets and Stocks Markets, chapter 3, pages 47-82, World Scientific Publishing Co. Pte. Ltd..

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    More about this item

    Keywords

    Multivariate approach; Oil Prices; OECD stock markets; GARCH-DCC.;
    All these keywords.

    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models

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