Addressing COP21 using a stock and oil market integration index
COP21 implementation should lead to a decline in the future demand for fossil fuels.One key implication for investors is how to manage this risk. We construct a monthly stock and oil market integration index and demonstrate that oil investors can offset adverse oil price risk by holding diversified...
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| Format: | Article |
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Elsevier Ltd.
2018
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| _version_ | 1825805152254164992 |
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| author | Batten, Jonathan A. Kinateder, Harald Szilagyi, Peter G. Wagner, Niklas F. |
| author_facet | Batten, Jonathan A. Kinateder, Harald Szilagyi, Peter G. Wagner, Niklas F. |
| author_sort | Batten, Jonathan A. |
| collection | UUM |
| description | COP21 implementation should lead to a decline in the future demand for fossil fuels.One key implication for investors is how to manage this risk. We construct a monthly stock and oil market integration index and demonstrate that oil investors can offset adverse oil price risk by holding diversified global stock portfolios.The portfolios are formed from eight different combinations of developed and emerging stock markets.We show that measuring the degree of stock-oil market integration is critical to managing the time-varying degrees of integration. Under normal market conditions markets are segmented and this yields the opportunity for oil investors to diversify energy price risk through the purchase of stocks. The optimal oil-stock diversified portfolio provides risk-adjusted positive benefits to investors, with portfolio weights changing over time as COP21 implementation proceeds. |
| first_indexed | 2024-07-04T06:27:09Z |
| format | Article |
| id | uum-24712 |
| institution | Universiti Utara Malaysia |
| last_indexed | 2024-07-04T06:27:09Z |
| publishDate | 2018 |
| publisher | Elsevier Ltd. |
| record_format | eprints |
| spelling | uum-247122018-09-04T08:22:08Z https://repo.uum.edu.my/id/eprint/24712/ Addressing COP21 using a stock and oil market integration index Batten, Jonathan A. Kinateder, Harald Szilagyi, Peter G. Wagner, Niklas F. HB Economic Theory COP21 implementation should lead to a decline in the future demand for fossil fuels.One key implication for investors is how to manage this risk. We construct a monthly stock and oil market integration index and demonstrate that oil investors can offset adverse oil price risk by holding diversified global stock portfolios.The portfolios are formed from eight different combinations of developed and emerging stock markets.We show that measuring the degree of stock-oil market integration is critical to managing the time-varying degrees of integration. Under normal market conditions markets are segmented and this yields the opportunity for oil investors to diversify energy price risk through the purchase of stocks. The optimal oil-stock diversified portfolio provides risk-adjusted positive benefits to investors, with portfolio weights changing over time as COP21 implementation proceeds. Elsevier Ltd. 2018-05 Article PeerReviewed Batten, Jonathan A. and Kinateder, Harald and Szilagyi, Peter G. and Wagner, Niklas F. (2018) Addressing COP21 using a stock and oil market integration index. Energy Policy, 116. pp. 127-136. ISSN 03014215 http://doi.org/10.1016/j.enpol.2018.01.048 doi:10.1016/j.enpol.2018.01.048 doi:10.1016/j.enpol.2018.01.048 |
| spellingShingle | HB Economic Theory Batten, Jonathan A. Kinateder, Harald Szilagyi, Peter G. Wagner, Niklas F. Addressing COP21 using a stock and oil market integration index |
| title | Addressing COP21 using a stock and oil market integration index |
| title_full | Addressing COP21 using a stock and oil market integration index |
| title_fullStr | Addressing COP21 using a stock and oil market integration index |
| title_full_unstemmed | Addressing COP21 using a stock and oil market integration index |
| title_short | Addressing COP21 using a stock and oil market integration index |
| title_sort | addressing cop21 using a stock and oil market integration index |
| topic | HB Economic Theory |
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