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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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Main Authors:	Batten, Jonathan A., Kinateder, Harald, Szilagyi, Peter G., Wagner, Niklas F.
Format:	Article
Published:	Elsevier Ltd. 2018
Subjects:	HB Economic Theory
Online Access:	http://repo.uum.edu.my/24712/ http://doi.org/10.1016/j.enpol.2018.01.048
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spelling	my.uum.repo.247122018-09-04T08:22:08Z http://repo.uum.edu.my/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
institution	Universiti Utara Malaysia
building	UUM Library
collection	Institutional Repository
continent	Asia
country	Malaysia
content_provider	Universiti Utara Malaysia
content_source	UUM Institutionali Repository
url_provider	http://repo.uum.edu.my/
topic	HB Economic Theory
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
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.
format	Article
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.
title	Addressing COP21 using a stock and oil market integration index
title_short	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_sort	addressing cop21 using a stock and oil market integration index
publisher	Elsevier Ltd.
publishDate	2018
url	http://repo.uum.edu.my/24712/ http://doi.org/10.1016/j.enpol.2018.01.048
_version_	1644284121695911936
score	13.211869

Addressing COP21 using a stock and oil market integration index

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