Conference Paper
Connectedness and Portfolio Management between Clean Energy, Crude Oil Prices and Equities Market before and During the Ukraine War: Evidence for GCC Countries
No.
ERF30_141
Publisher
ERF
Date
March, 2024
This paper examines the risk dependence between clean energy, oil prices and GCC stock markets during the period 2015-2023 covering the two recent events of COVID-19 pandemic and Russia Ukrainian conflict. The main purpose is to investigate the volatility spillovers of clean and dirty energy markets versus GCC stock indices. We use two methodologies namely the Diebold, Yilmaz (2012, 2014) volatility spillover index and the wavelet coherence analysis. The Diebold-Yilmaz connectedness index shows that clean energy, KSA and Kuwait stock markets are the net transmitter of shocks while oil prices and the stock markets of UAE, Qatar, Bahrain and Oman are net receiver of volatility. The wavelet coherency approach reveals that the dependence between clean energy/oil prices and the stock markets varies across time scales and considered countries. The intense coherence is detected during the oil crash and COVID-19 crisis at lower frequencies (higher scales). The findings have several financial implications for investors and portfolio managers. The GCC investors should added either clean energy or crude oil in their portfolio of stocks in order to minimizing the risk of portfolio. The hedging ratios show that both clean energy and crude oil offer effective hedging strategy. Finally, the hedging effectiveness index reveals a higher reduction of hedged portfolio risk involving clean energy than crude oil.
Authors
Walid Chkili
Associate Professor of Finance, Faculty of Economics...
Authors
Samir Mabrouk
Associate Professor of Finance, Faculty of Economic...