Author(s): Hammami Algia,Ameni Ghenimi, Bouri Abdelfatteh
In this work, our objective is to study the transmission of volatility between oil and stock markets in the developed countries (USA, Germany, Italy, France and Japan) and the emerging ones (Thailand, Brazil, and Argentina) for the period 1998-2015. Our methodology consists of analyzing the monthly data using GARCH-BEKK model, to capture the effect of volatility the oil price on the different stock markets. The empirical results in the emerging countries indicate that the relationships are unidirectional from the stock market to the oil market. For the developed countries, we find that the transmission of volatility is unidirectional from the oil market to the stock market. In the USA and Italy, no transmission was found between oil prices and stock market. The transmission is bidirectional only in Thailand. Regarding the shock transmission, it can be said that the emerging countries are affected by the oil price shocks at the same level as the developed countries. However, for the effect of transmission of volatility, there is a great difference between these two types’ countries. The GARCH-BEKK model is more effective than the other versions to minimize the risk of the oil-stock portfolio