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Volatility Between Oil Prices and Stock Returns of Dow Jones Index: A Bivariate GARCH (BEKK) Approach

  • Dimitrios Kartsonakis MademlisEmail author
  • Nikolaos Dritsakis
Conference paper
Part of the Springer Proceedings in Business and Economics book series (SPBE)

Abstract

The relationship between the oil prices and the stock market has occupied several researchers in recent years. Most papers show that stock markets are affected by oil price fluctuations, with few papers supporting the reverse direction. The causal relationships between stock markets and oil prices depend on symmetric and asymmetric changes in oil prices or focus on the unexpected changes in oil prices. In this paper we employ a bivariate BEKK-GARCH(1,1) model in order to estimate the conditional volatility between the oil prices and the stock market index Dow Jones. We are using daily returns from 21 October 1997 to 31 May 2017. The results of our work showed that there is neither transmission of shocks nor volatility spillover between the two markets. Moreover, it was found that the conditional volatility of the returns for both indices is affected only by their own shocks and their own lagged conditional volatility.

Keywords

BEKK-GARCH model Oil prices Stock market Volatility 

JEL Classification

G10 C32 

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Copyright information

© Springer Nature Switzerland AG 2018

Authors and Affiliations

  • Dimitrios Kartsonakis Mademlis
    • 1
    Email author
  • Nikolaos Dritsakis
    • 1
  1. 1.University of MacedoniaThessalonikiGreece

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