Quotation Antonakakis, Nikolaos, Chatziantoniou, Ioannis, Filis, George. 2014. Dynamic Spillovers of Oil Price Shocks and Economic Policy Uncertainty. Energy Economics 44 433-447.


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Abstract

his study examines the volatility and correlation and their relationships among the euro/US dollar exchange rates, the S&P500 equity indices, and the prices of WTI crude oil and the precious metals (gold, silver, and platinum) over the period 2005 to 2012. Our model links the univariate volatilities with the correlations via a hidden stochastic decision tree. The ensuing Hidden Markov Decision Tree (HMDT) model is in fact an extension of the Hidden Markov Model (HMM) introduced by Jordan et al. (1997). The architecture of this model is the opposite that of the classical deterministic approach based on a binary decision tree and, it allows a probabilistic vision of the relationship between univariate volatility and correlation. Our results are categorized into three groups, namely (1) exchange rates and oil, (2) S&P500 indices, and (3) precious metals. A switching dynamics is seen to characterize the volatilities, while, in the case of the correlations, the series switch from one regime to another, this movement touching a peak during the period of the Subprime crisis in the US, and again during the days following the Tohoku earthquake in Japan. Our findings show that the relationships between volatility and correlation are dependent upon the nature of the series considered, sometimes corresponding to those found in econometric studies, according to which correlation increases in bear markets, at other times differing from them.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal Energy Economics
Citation Index SSCI
WU Journalrating 2009 A
WU-Journal-Rating new FIN-A, STRAT-B, VW-B, WH-B
Language English
Title Dynamic Spillovers of Oil Price Shocks and Economic Policy Uncertainty
Volume 44
Year 2014
Page from 433
Page to 447
Reviewed? Y
URL http://www.sciencedirect.com/science/article/pii/S0140988314001157

Associations

People
Antonakakis, Nikolaos (Former researcher)
External
Chatziantoniou, Ioannis (University of Portsmouth, United Kingdom)
Filis, George (Bournemouth University, United Kingdom)
Organization
Department of Economics (Badinger) (Details)
Research areas (Ă–STAT Classification 'Statistik Austria')
5300 Economics (Details)
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