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Estimating Spillover Effect from International Oil Market to Stock Market: Evidence from Korean Portfolio-Level Analysis

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  • Sunghee Choi

    (Department of International Commerce, Faculty of Economics and Commerce, Keimyung University, Daegu 42601, Republic of Korea)

Abstract

Using a diagonal BEKK model, this paper estimates a spillover effect from the international crude oil market to the Korean stock market. Empirical results suggest that shocks and volatility in Dubai oil prices are significantly transmitted into twenty portfolios of the Korean stock market. Also, it was found that these spillover effects dramatically rose during the year 2020, when the threat of COVID-19 was the most serious. More specifically, oil-oriented portfolios, such as the power and gas firms’ portfolio and chemical firms’ portfolio, had a greater spillover effect from the international crude oil market rather than other portfolios. Further, compared to larger-capitalization firm portfolios, small-capitalization firm portfolios had a relatively greater spillover effect. Several implications and important avenues for further research are identified.

Suggested Citation

  • Sunghee Choi, 2024. "Estimating Spillover Effect from International Oil Market to Stock Market: Evidence from Korean Portfolio-Level Analysis," Economies, MDPI, vol. 12(4), pages 1-14, April.
    • Handle: RePEc:gam:jecomi:v:12:y:2024:i:4:p:92-:d:1375970
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    1. Boldanov, Rustam & Degiannakis, Stavros & Filis, George, 2016. "Time-varying correlation between oil and stock market volatilities: Evidence from oil-importing and oil-exporting countries," International Review of Financial Analysis, Elsevier, vol. 48(C), pages 209-220.
    2. McAleer, Michael & Chan, Felix & Hoti, Suhejla & Lieberman, Offer, 2008. "Generalized Autoregressive Conditional Correlation," Econometric Theory, Cambridge University Press, vol. 24(6), pages 1554-1583, December.
    3. Antonakakis, Nikolaos & Chatziantoniou, Ioannis & Filis, George, 2013. "Dynamic co-movements of stock market returns, implied volatility and policy uncertainty," Economics Letters, Elsevier, vol. 120(1), pages 87-92.
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