Working Paper Article Version 1 This version is not peer-reviewed

Multi-Horizon Dependence between Crude Oil and East Asian Stock Markets and Implications in Risk Management

Version 1 : Received: 5 December 2019 / Approved: 7 December 2019 / Online: 7 December 2019 (01:28:25 CET)

A peer-reviewed article of this Preprint also exists.

Cai, X.; Hamori, S.; Yang, L.; Tian, S. Multi-Horizon Dependence between Crude Oil and East Asian Stock Markets and Implications in Risk Management. Energies 2020, 13, 294. Cai, X.; Hamori, S.; Yang, L.; Tian, S. Multi-Horizon Dependence between Crude Oil and East Asian Stock Markets and Implications in Risk Management. Energies 2020, 13, 294.

Journal reference: Energies 2020, 13, 294
DOI: 10.3390/en13020294

Abstract

This paper examines the dynamic dependence structure of crude oil and East Asian stock markets at multiple frequencies using wavelet and copulas. We also investigate risk management implications and diversification benefits of oil-stock portfolios by calculating and comparing risk and tail risk hedging performance. Our results provide strong evidence of time-varying dependence and asymmetric tail dependence between crude oil and East Asian stock markets at different frequencies. The level and fluctuation of their dependencies increase as time scale increases. Furthermore, we find the time-varying hedging benefits differ at investment horizons and reduced over the long run.

Subject Areas

crude oil; East Asian stock markets; wavelet; copula; dynamic hedging

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