Volatility Transmission between Oil and LME Futures

Jaehwan Park

Abstract


This paper investigates the volatility transmission between oil and base metals to assess the possibility of hedge strategy across commodity markets. In order to identify the volatility linkage of oil to the base metals, the bivariate GARCH model is applied using daily returns data period over 2000-2016. It is found that evidence of volatility transmission between oil and base metals is somewhat strong with a 1% significant level. This result suggests the investment idea of commodity hedging strategy of cross-market is important.


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DOI: https://doi.org/10.11114/aef.v5i2.2944

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Applied Economics and Finance    ISSN 2332-7294 (Print)   ISSN 2332-7308 (Online)

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