Volatility Transmission between the Oil and Stock Markets

Inhaltsverzeichnis (Table of Contents)

• 1 INTRODUCTION
• 2 VOLATILITY: CONCEPT AND EMPIRICAL EVIDENCE
• 2.1 Definition of Price Volatility
• 2.2 Analysis of Oil Price Volatility
• 2.3 Economic Sources of Price Volatility
• 3 METHODOLOGY
• 3.1 Modelling Oil Price Volatility
• 3.2 Univariate Volatility Models
• 3.2.1 Historical Volatility
• 3.2.2 ARCH
• 3.2.3 GARCH
• 3.2.4 GJR-GARCH
• 3.2.5 ARMA-GJR-GARCH
• 3.2.6 Conditional Distribution
• 3.2.7 Regime-Switching Models
• 3.2.8 Markov-Switching Models
• 3.2.9 Markov-Switching ARCH (SWARCH)
• 3.2.10 Indicators of synchronization
• 3.3 Bivariate GARCH Models - Volatility Transmission Models
• 3.3.1 VECH
• 3.3.2 BEKK GARCH (1,1)
• 4 FINANCIAL MARKET AND OIL PRICE VOLATILITY: CONTAGION AND TRANSMISSION CHANNELS
• 4.1 Definition of Contagion
• 5 EMPIRICAL SECTION
• 5.1 Data description
• 5.2 Estimation of Oil Price Volatility
• 5.2.1 Univariate GARCH (1,1) and GJR-GARCH (1,1)
• 5.2.2 Results of GARCH (1,1) and GJR-GARCH (1,1) Models
• 5.3 Volatility Transmission
• 5.3.1 Markov-Switching Estimation
• 5.3.2 Indicator of Synchronization
• 5.4 Estimation of BEKK GARCH (1,1)
• 5.4.1 Testing for Volatility Transmission
• 5.4.2 Empirical Results
• 6 DISCUSSION OF THE EMPIRICAL RESULTS
• 6.1 Volatility Transmission Channel – Financial Deleveraging
• 6.2 Extension of the model
• 6.2.1 Overvaluation and GARCH (1,1)

Frequently Asked Questions

What is the main objective of this thesis?

The thesis analyzes the volatility transmission between oil and stock markets, specifically looking at the period from 2002 to 2009, including the 2008 financial crisis.

Which statistical models are used to measure oil price volatility?

The study analyzes five major models: ARCH, GARCH, BEKK-GARCH, GJR-GARCH, and the Markov-switching model.

How did the 2008 financial crisis impact the findings?

The crisis led to excessive price volatility, indicating structural changes in how capital and financial assets were priced on global markets.

What is meant by "Volatility Transmission"?

It refers to the process where price fluctuations and risks in one market (like oil) spread to and influence the volatility of another market (like stocks).

Where was this research conducted?

The work was completed during a research internship at the Organization of the Petroleum Exporting Countries (OPEC) in Vienna, supported by the University of Potsdam.