Dynamic conditional correlation, volatility spillover and Hedge for future oil prices and shares of major companies in the oil sector
DOI:
https://doi.org/10.1590/1980-53575325ampcKeywords:
Dynamic Conditional Correlation–DCC, Volatility Spillover, Hedge, OilAbstract
In this article we use the approaches of the Dynamic Conditional Correlation – standard DCC of Engle (2002), the approach of the Spillover Index of volatility of Diebold and Yilmaz (2009, 2012, 2014, 2015) and the identical hedge of Maghyereh et al. (2017), to study the shock transmission mechanism, volatility contagion and portfolio diversification in the oil sector of the volatility between changes in oil prices and changes in stock prices of companies in the oil sector in a period that encompasses the covid-19 pandemic. The research results suggested that changes in oil prices for the WTI and oil companies showed a significant volatility, with unprecedented peaks in the period of the covid-19 pandemic. In addition, the results signaled that volatility transmissions in the oil sector did not vary over time, that is, they are similar since the financial crisis of 2007/2009. Finally, the effectiveness of the hedge ratio in portfolio diversification between WTI oil and oil companies is discussed.
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