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Oil Volatility Spillovers to the US and EU industries

Lelis, Natalia LU and Pirhadi, Leyla (2011) NEKM07 20111
Department of Economics
Abstract
This essay examines the volatility spillover effects from oil price shocks across different US and
EU industries, using a GJR-GARCH(1,1) model. We conclude that the European industries are
much more sensitive to oil and stock market shocks compared to their US counterparts. In US,
oil news have significant effect only on Basic Materials, Industrials, Utilities and Consumer
Services and coefficient significance depends much on the estimation sample. In contrast, all the
EU industry returns are significantly influenced by oil shocks. The most sensitive are Basic
Materials and Industrials, while the least affected are Telecommunications, Healthcare and
Consumer Goods. However, variance ratios show that the share of oil shocks in an... (More)
This essay examines the volatility spillover effects from oil price shocks across different US and
EU industries, using a GJR-GARCH(1,1) model. We conclude that the European industries are
much more sensitive to oil and stock market shocks compared to their US counterparts. In US,
oil news have significant effect only on Basic Materials, Industrials, Utilities and Consumer
Services and coefficient significance depends much on the estimation sample. In contrast, all the
EU industry returns are significantly influenced by oil shocks. The most sensitive are Basic
Materials and Industrials, while the least affected are Telecommunications, Healthcare and
Consumer Goods. However, variance ratios show that the share of oil shocks in an industry’s
total volatility remains very small (0-0.46% for US sectors and 0.23-1.55% for EU) compared to
the innovations from the broad US and EU stock markets. For futures contracts these ratios are
higher, and namely 0.03-2.73% and 0.21-4.66% respectively. (Less)
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author
Lelis, Natalia LU and Pirhadi, Leyla
supervisor
organization
course
NEKM07 20111
year
type
H2 - Master's Degree (Two Years)
subject
keywords
Volatility Spillovers, Oil Prices, Industries
language
English
id
1975971
date added to LUP
2011-06-17 12:29:49
date last changed
2011-06-17 12:29:49
@misc{1975971,
  abstract     = {This essay examines the volatility spillover effects from oil price shocks across different US and
EU industries, using a GJR-GARCH(1,1) model. We conclude that the European industries are
much more sensitive to oil and stock market shocks compared to their US counterparts. In US,
oil news have significant effect only on Basic Materials, Industrials, Utilities and Consumer
Services and coefficient significance depends much on the estimation sample. In contrast, all the
EU industry returns are significantly influenced by oil shocks. The most sensitive are Basic
Materials and Industrials, while the least affected are Telecommunications, Healthcare and
Consumer Goods. However, variance ratios show that the share of oil shocks in an industry’s
total volatility remains very small (0-0.46% for US sectors and 0.23-1.55% for EU) compared to
the innovations from the broad US and EU stock markets. For futures contracts these ratios are
higher, and namely 0.03-2.73% and 0.21-4.66% respectively.},
  author       = {Lelis, Natalia and Pirhadi, Leyla},
  keyword      = {Volatility Spillovers,Oil Prices,Industries},
  language     = {eng},
  note         = {Student Paper},
  title        = {Oil Volatility Spillovers to the US and EU industries},
  year         = {2011},
}