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Dynamic Linkages Between the Oil Spot, Oil Futures, and Stock Markets: Evidence from Dubai

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  • Rim Ammar Lamouchi

    (Department of Finance, Faculty of Economics and Administration, King Abdulaziz University, Saudi Arabia,)

  • Suha Mahmoud Alawi

    (Department of Finance, Faculty of Economics and Administration, King Abdulaziz University, Saudi Arabia,)

Abstract

In this paper, we investigate the dynamic linkages between prices on the oil spot, oil futures, and energy stock markets in Dubai between June 29, 2010 and November 2, 2018. We apply a class of multivariate GARCH model to analyze this relationship. We also consider the corresponding markets in the United States, and in order to examine the volatility transmission among the three markets, we use the HAR model. Our empirical results reveal that the correlations between the three markets in Dubai are lower than in the US. We observe high levels of correlations before crises, but this was not the case during the crises themselves. Furthermore, we demonstrate the existence of volatility transmission between the oil spot and futures markets and the oil spot and energy stocks markets, while there is only a unidirectional effect from the energy stock market to the oil futures market. Overall, our findings are crucial for understanding the dynamics that exist between the three markets.

Suggested Citation

  • Rim Ammar Lamouchi & Suha Mahmoud Alawi, 2020. "Dynamic Linkages Between the Oil Spot, Oil Futures, and Stock Markets: Evidence from Dubai," International Journal of Energy Economics and Policy, Econjournals, vol. 10(1), pages 377-383.
    • Handle: RePEc:eco:journ2:2020-01-50
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    References listed on IDEAS

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    Cited by:

    1. Ngo Thai HUNG, 2020. "Conditional dependence between oil prices and CEE stock markets: a copula-GARCH approach Abstract: This study investigates both the constant and time-varying conditional dependency between crude oil a," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 11, pages 62-86, June.
    2. Rim Ammar Lamouchi, 2020. "Long Memory and Stock Market Efficiency: Case of Saudi Arabia," International Journal of Economics and Financial Issues, Econjournals, vol. 10(3), pages 29-34.

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    More about this item

    Keywords

    Oil prices; Stock market; DCC-GARCH; VAR.;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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