Abstract
Dependence among Energy and Asian Emerging Stocks: A Dynamic Conditional Correlation Approach
Highlights
The 2018 began with a trend of increase in the prices of crude oil
The results show that the dynamic correlations are higher in crises time as compared to pre-crisis time for the markets of China, Taiwan, Malaysia, Philippine, Thailand, India, South Korea, Indonesia leads towards rejection of null hypothesis and signifies the presence of contagion effect in these markets
Using daily sample of WTI spot prices and stock indices of Asian emerging markets, this study attempts to investigate whether there exist contagion between stock markets and crude oil during the Eurozone debt crisis.For this purpose the study utilized the Multivariate GARCH Dynamic conditional correlation (DCC) model on the data set of 30-01-2005 to 31-012012
Summary
The 2018 began with a trend of increase in the prices of crude oil. After November 2014, the prices of crude oil experienced an increase and went beyond $80 per barrel (IEEJ May, 2018). The expanding significance of crude oil in the economy has become the reason why the economists, investors and policy makers have paid huge importance in studying the patterns of correlations between energy and stock markets. In finance literature numerous studies focused on investigating the nature of linkage between equity market and energy market In some studies, this relationship is explored in the context of developed economies. This study concentrates on the Eurozone debt crisis by investigating the financial contagion effect between Asian emerging equity markets and energy market. This study adds to literature of portfolio diversification by exploring the contagion effect between Asian emerging market and energy market. The last section of this paper includes conclusions and future recommendations
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