On the risk spillover across the oil market, financial markets, and the oil-related CDS sectors: A Volatility impulse response approach

In contrast to previous CDS literature, this study focuses on the magnitude of volatility transmission and the risk spillover mechanism across the oil market, financial market risks, and the oil-related Credit Default Swap (CDS) sectors. Our dataset includes futures prices of West Texas Intermediate (WTI) in addition to seven different measures of markets and credit risks. Four of the vast risk measures are the oil-related sector CDSs for auto, chemicals, natural gas, and utility sector CDSs. Two measures of the financial market risk are further included in the study, which include the one-month expected equity volatility measured by the volatility index (VIX) and the one-month bond option volatility estimate (MOVE) or swaption move expected volatility (SMOVE). The daily dataset covers the period from January 6, 2004 to February 2, 2016. The volatility transmission mechanism across the oil and financial markets and CDS sectors is examined, using the volatility impulse responses. In addition to showing the magnitude of the volatility transmission, the volatility impulse responses have the advantage of providing valuable information on the speed of risk transmission among different markets. The shape and sign of the volatility impulse responses also provide significant information on the transmission mechanism. We evaluate the risk transmission due to several recent crisis shocks. The results show complicated transmission mechanisms that spread over long periods

The impact of oil prices on the stock returns in Turkey: A TVP-VAR approach

Balcilar, Mehmet/0000-0001-9694-5196WOS: 000498749000037This paper aims to analyze the effect of crude oil price shocks and macroeconomic variables on the Turkish stock market. To this aim, a time-varying parameter vector autoregression model (TVP-VAR) is estimated by using monthly data covering the period from February 1988 to March 2017. the time-varying responses and forecast error decompositions indicate that the impact of the variables on the stock market returns show substantial time variation. the effect of real crude oil price shocks is lower compared to those of exchange rate and interest rate. Output shock has a positive effect on stock returns, as expected. the time-varying forecast error decomposition suggest that stock returns are largely explained by the variations in exchange rate and interest rate. (C) 2019 Elsevier B.V. All rights reserved