Time-varying transmission between oil and equities in the MENA region: New evidence from DCC-MIDAS analyses

Awartani, B., Javed, F., Maghyereh, A. and Virkd, N. 2018. Time-varying transmission between oil and equities in the MENA region: New evidence from DCC-MIDAS analyses. Review of Development Finance. 8 (2), pp. 481-483. https://doi.org/10.1016/j.rdf.2018.11.001

TitleTime-varying transmission between oil and equities in the MENA region: New evidence from DCC-MIDAS analyses
TypeJournal article
AuthorsAwartani, B., Javed, F., Maghyereh, A. and Virkd, N.
Abstract

In this paper we use the DCC-MIDAS (Dynamic Conditional Correlation-Mixed Data Sampling) model to infer the association between oil and equities in five MENA countries between February 2006 and April 2017. The model indicates that higher oil returns tends to reduce the long-term risk of the Saudi market, but to increase it in other markets. The risk transfer from oil to MENA equities is found to be weak. The dynamic conditional correlation between oil and equities is not always positive and it unexpectedly changes sign during the sample period. However, the association always strengthens when there is a large draw down in oil prices as well as during periods of high volatility. Finally, we find that short term association occasionally breaks from the longer-term correlation particularly in Egypt and Turkey. These patterns of influence and associations are unique, and have important implications for equity portfolio managers who are interested in investing in energy and MENA equities.

KeywordsGARCH-MIDAS
DCC-MIDAS
Risk transfer
Oil
MENA Equities
JournalReview of Development Finance
Journal citation8 (2), pp. 481-483
ISSN1879-9337
Year2018
PublisherElsevier
Publisher's version
Digital Object Identifier (DOI)https://doi.org/10.1016/j.rdf.2018.11.001
Publication dates
Published online19 Nov 2018
Published in printDec 2018
LicenseCC BY-NC-ND 4.0

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