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Oil price risk exposure of BRIC stock markets and hedging effectiveness

Annals of operations research, 2022-06, Vol.313 (1), p.145-170 [Peer Reviewed Journal]

The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature 2021 ;COPYRIGHT 2022 Springer ;The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature 2021. ;ISSN: 0254-5330 ;EISSN: 1572-9338 ;DOI: 10.1007/s10479-021-04078-0

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Title:
Oil price risk exposure of BRIC stock markets and hedging effectiveness
Author: Shahzad, Syed Jawad Hussain ; Bouri, Elie ; Rehman, Mobeen Ur ; Naeem, Muhammad Abubakr ; Saeed, Tareq
Subjects: Analysis ; Business and Management ; Combinatorics ; Crude oil ; Crude oil prices ; Diversification ; Equity ; Exports ; Hedging ; Hedging (Finance) ; Influence ; Institutional investments ; Methods ; Operations research ; Operations Research/Decision Theory ; Original Research ; Petroleum ; Portfolio management ; Prices and rates ; Risk (Economics) ; Risk exposure ; Securities markets ; Stock exchanges ; Stock markets ; Theory of Computation
Is Part Of: Annals of operations research, 2022-06, Vol.313 (1), p.145-170
Description: We study the tail dependence between crude oil and BRIC stock markets using a time-varying optimal copula (TVOC) approach. We show evidence of multiple tail dependence regimes, suggesting that simple static or dynamic copula specifications do not fully characterize the extreme dependence between oil and BRIC stock markets. The identified combinations of asymmetric and extreme positive lower tail dependence justify the application of the TVOC. Interestingly, the positive lower tail dependence between oil and stock markets and risk spillover from oil is higher for Brazil and Russia (oil exporters) than India and China (oil importers). Finally, we assess the effectiveness of hedging and measure the conditional diversification benefits of investing in oil for BRIC stock indices. Notably, the Chinese and Indian equity markets offer higher conditional diversification benefits when combined with oil in an equally weighted portfolio.
Publisher: New York: Springer US
Language: English
Identifier: ISSN: 0254-5330
EISSN: 1572-9338
DOI: 10.1007/s10479-021-04078-0
Source: ProQuest Central

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Oil price risk exposure of BRIC stock markets and hedging effectiveness

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