IDEAS home Printed from https://ideas.repec.org/a/gam/jjrfmx/v16y2023i3p173-d1088109.html
   My bibliography  Save this article

Dynamic Relationship between Volatility Risk Premia of Stock and Oil Returns

Author

Listed:
  • Nobuhiro Nakamura

    (Graduate School of Business Administration, Hitotsubashi University, 2-1-2 Hitotsubashi, Chiyoda-ku, Tokyo 101-8439, Japan)

  • Kazuhiko Ohashi

    (Graduate School of Business Administration, Hitotsubashi University, 2-1-2 Hitotsubashi, Chiyoda-ku, Tokyo 101-8439, Japan)

  • Daisuke Yokouchi

    (Graduate School of Business Administration, Hitotsubashi University, 2-1-2 Hitotsubashi, Chiyoda-ku, Tokyo 101-8439, Japan)

Abstract

This study investigates the relationship between the volatility risk premia (VRP) of stock and oil returns. Using daily data on VRP from 10 May 2007 to 16 May 2017, VAR analyses on the stock and oil VRP are conducted, and it is found that the effects of the stock VRP on the oil VRP are limited and, if any, short-lived. In contrast, the VRP of oil has significantly positive and long-lasting effects on the stock VRP after the financial crisis. These results suggest that investors’ sentiments (measured by VRP) are transmitted from the oil to the stock market over time, but not vice versa. This is unexpected because the financialization of commodities means a massive increase in investment in commodities by investors in the traditional stock and bond markets; hence, the direction of effects is thought to be from the stock to the commodity market.

Suggested Citation

  • Nobuhiro Nakamura & Kazuhiko Ohashi & Daisuke Yokouchi, 2023. "Dynamic Relationship between Volatility Risk Premia of Stock and Oil Returns," JRFM, MDPI, vol. 16(3), pages 1-20, March.
    • Handle: RePEc:gam:jjrfmx:v:16:y:2023:i:3:p:173-:d:1088109
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1911-8074/16/3/173/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/1911-8074/16/3/173/
    Download Restriction: no
    ---><---

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jjrfmx:v:16:y:2023:i:3:p:173-:d:1088109. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.