Abstract
COP21 implementation should lead to a decline in the future demand for fossil fuels. One key implication for investors is how to manage this risk. We construct a monthly stock and oil market integration index and demonstrate that oil investors can offset adverse oil price risk by holding diversified global stock portfolios. The portfolios are formed from eight different combinations of developed and emerging stock markets. We show that measuring the degree of stock-oil market integration is critical to managing the time-varying degrees of integration. Under normal market conditions markets are segmented and this yields the opportunity for oil investors to diversify energy price risk through the purchase of stocks. The optimal oil-stock diversified portfolio provides risk-adjusted positive benefits to investors, with portfolio weights changing over time as COP21 implementation proceeds.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
