Risk and Return Transmissions From Crude Oil to Latin American Stock Markets During the Crisis: Portfolio Implications

Using the DCC-GARCH model, this study examines the return and volatility spillovers between crude oil and emerging Latin American stock markets during the entire studying period and two subsamples, including the global financial crisis and the Chinese Stock market crash. The findings reveal a positi...

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Main Authors:	Imran Yousaf, Shoaib Ali, Muhammad Naveed, Ifraz Adeel
Format:	Article
Language:	English
Published:	SAGE Publishing 2021-04-01
Series:	SAGE Open
Online Access:	https://doi.org/10.1177/21582440211013800

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spelling	doaj-ae9148362a0848f2b295c383f93e89dc2021-05-09T23:04:53ZengSAGE PublishingSAGE Open2158-24402021-04-011110.1177/21582440211013800Risk and Return Transmissions From Crude Oil to Latin American Stock Markets During the Crisis: Portfolio ImplicationsImran Yousaf0Shoaib Ali1Muhammad Naveed2Ifraz Adeel3Air University, Islamabad, PakistanAir University, Islamabad, PakistanBahria University, Islamabad, PakistanThe University of Lahore, PakistanUsing the DCC-GARCH model, this study examines the return and volatility spillovers between crude oil and emerging Latin American stock markets during the entire studying period and two subsamples, including the global financial crisis and the Chinese Stock market crash. The findings reveal a positive causal effect from Brazil and Mexico’s stock price changes to the oil market during the global financial crisis. During the Chinese stock market crash, the return spillover is unidirectional from the oil to Brazil and Mexico equity markets. The findings show no significant volatility transmission between oil and Latin American stock markets during the global financial crisis. Contrarily, we observe bidirectional volatility transmission between the oil and Brazilian stock markets during the Chinese stock market crash. Finally, we calculate the optimal weights and hedge ratios for the oil and stock portfolios. In comparison to the global financial crisis, the results suggest that lesser oil assets are required to minimize portfolio risk in the Chinese stock market crash. These results offer valuable insights for portfolio diversification, asset pricing, and risk management.https://doi.org/10.1177/21582440211013800
collection	DOAJ
language	English
format	Article
sources	DOAJ
author	Imran Yousaf Shoaib Ali Muhammad Naveed Ifraz Adeel
spellingShingle	Imran Yousaf Shoaib Ali Muhammad Naveed Ifraz Adeel Risk and Return Transmissions From Crude Oil to Latin American Stock Markets During the Crisis: Portfolio Implications SAGE Open
author_facet	Imran Yousaf Shoaib Ali Muhammad Naveed Ifraz Adeel
author_sort	Imran Yousaf
title	Risk and Return Transmissions From Crude Oil to Latin American Stock Markets During the Crisis: Portfolio Implications
title_short	Risk and Return Transmissions From Crude Oil to Latin American Stock Markets During the Crisis: Portfolio Implications
title_full	Risk and Return Transmissions From Crude Oil to Latin American Stock Markets During the Crisis: Portfolio Implications
title_fullStr	Risk and Return Transmissions From Crude Oil to Latin American Stock Markets During the Crisis: Portfolio Implications
title_full_unstemmed	Risk and Return Transmissions From Crude Oil to Latin American Stock Markets During the Crisis: Portfolio Implications
title_sort	risk and return transmissions from crude oil to latin american stock markets during the crisis: portfolio implications
publisher	SAGE Publishing
series	SAGE Open
issn	2158-2440
publishDate	2021-04-01
description	Using the DCC-GARCH model, this study examines the return and volatility spillovers between crude oil and emerging Latin American stock markets during the entire studying period and two subsamples, including the global financial crisis and the Chinese Stock market crash. The findings reveal a positive causal effect from Brazil and Mexico’s stock price changes to the oil market during the global financial crisis. During the Chinese stock market crash, the return spillover is unidirectional from the oil to Brazil and Mexico equity markets. The findings show no significant volatility transmission between oil and Latin American stock markets during the global financial crisis. Contrarily, we observe bidirectional volatility transmission between the oil and Brazilian stock markets during the Chinese stock market crash. Finally, we calculate the optimal weights and hedge ratios for the oil and stock portfolios. In comparison to the global financial crisis, the results suggest that lesser oil assets are required to minimize portfolio risk in the Chinese stock market crash. These results offer valuable insights for portfolio diversification, asset pricing, and risk management.
url	https://doi.org/10.1177/21582440211013800
work_keys_str_mv	AT imranyousaf riskandreturntransmissionsfromcrudeoiltolatinamericanstockmarketsduringthecrisisportfolioimplications AT shoaibali riskandreturntransmissionsfromcrudeoiltolatinamericanstockmarketsduringthecrisisportfolioimplications AT muhammadnaveed riskandreturntransmissionsfromcrudeoiltolatinamericanstockmarketsduringthecrisisportfolioimplications AT ifrazadeel riskandreturntransmissionsfromcrudeoiltolatinamericanstockmarketsduringthecrisisportfolioimplications
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Risk and Return Transmissions From Crude Oil to Latin American Stock Markets During the Crisis: Portfolio Implications

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