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Financial risk network architecture of energy firms

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  • Restrepo, Natalia
  • Uribe, Jorge M.
  • Manotas, Diego

Abstract

We assess volatility spillovers and directional connectedness among stock returns of the biggest 20 oil companies listed in the New York Stock Exchange (NYSE) between January 2002 and November 2016. The methodological approach we employed allows the study of the total average connectedness, statically and dynamically, as well as pairwise spillovers within oil firms during the sampled period. For instance, estimation results on full sample connectedness measures show that the system average connectedness is 84.7%. Based on the net pairwise spillovers estimates, we construct risk network representations for days of abnormal behavior in oil prices. This allows the identification of potential shock transmitters and receivers within the sample. The estimates provided can be used for portfolio decision purposes and for designing regulatory policies.

Suggested Citation

  • Restrepo, Natalia & Uribe, Jorge M. & Manotas, Diego, 2018. "Financial risk network architecture of energy firms," Applied Energy, Elsevier, vol. 215(C), pages 630-642.
    • Handle: RePEc:eee:appene:v:215:y:2018:i:c:p:630-642
    DOI: 10.1016/j.apenergy.2018.02.060
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    More about this item

    Keywords

    Volatility spillovers; Directional connectedness; Oil firms; VAR; Risk network;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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