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Spillovers and diversification benefits between oil futures and ASEAN stock markets

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  • Mensi, Walid
  • Rehman, Mobeen Ur
  • Vo, Xuan Vinh

Abstract

This study combines copula functions, wavelet decomposition and conditional VaR methods to examine spillovers and diversification benefits between oil futures and ASEAN stock markets (Indonesia, Philippines, Malaysia, Singapore, Vietnam and Thailand). The results show zero tail dependence between oil and stock returns at the short term. In contrast, we find a lower tail independence and an upper tail dependence at the long term. Our results highlight that oil futures serve as hedge assets at short term and a safe haven asset at the long term. Furthermore, we find significant and asymmetric risk spillovers from oil to ASEAN markets. The downside and upside spillovers are higher at the long term than short term and increase during the GFC, the recent oil crisis, and COVID-19 periods. Finally, we show that an equally weighted portfolio provides highest diversification benefits at both lower and medium tail distributions with the exception of Malaysian market. The diversification benefits of oil are sizeable for less coupling markets and fall during times of GFC and oil crisis.

Suggested Citation

  • Mensi, Walid & Rehman, Mobeen Ur & Vo, Xuan Vinh, 2022. "Spillovers and diversification benefits between oil futures and ASEAN stock markets," Resources Policy, Elsevier, vol. 79(C).
    • Handle: RePEc:eee:jrpoli:v:79:y:2022:i:c:s0301420722004482
    DOI: 10.1016/j.resourpol.2022.103005
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    Cited by:

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    More about this item

    Keywords

    ASEAN stock Markets; Crude oil prices; Spillovers; Copula; Wavelet; CoVaR;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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