Dynamic dependence between ETFs and crude oil prices by using EGARCH-Copula approach

Author First name, Last name, Institution

Muhammad Naeem, University of Central Punjab
Zaghum Umar, Zayed UniversityFollow
Sheraz Ahmed, LUT University
El Mehdi Ferrouhi, University Ibn Tofail

Document Type

Article

Source of Publication

Physica A: Statistical Mechanics and its Applications

Publication Date

11-1-2020

Abstract

© 2020 Elsevier B.V. In this study, we examine the average and extreme dependence between Exchange Traded Funds ETFs (both energy & commodity) and WTI crude oil prices by using EGARCH-copula models. We use both static (Normal, Student-t, Gumbel and Clayton) and time-varying (Normal and SJC) copulas to explore both average and extreme dependence. Based on the Akaike information criterion (AIC), our results show that time-varying copulas outperform the static copulas. Further, we have found strong enough positive correlations of energy and commodity ETFs with oil prices to suggest that they could be used as a tool for managing oil price risk. Also, contrasting results of time-varying copulas with each other provide useful information regarding the hedge or safe-haven properties of energy and commodity ETFs.

DOI Link

10.1016/j.physa.2020.124885

ISSN

0378-4371

Publisher

Elsevier B.V.

Volume

557

First Page

124885

Disciplines

Business

Keywords

Crude-oil prices, Dependence, EGARCH, ETFs, Time-varying copula

Scopus ID

85087588617

Recommended Citation

Naeem, Muhammad; Umar, Zaghum; Ahmed, Sheraz; and Ferrouhi, El Mehdi, "Dynamic dependence between ETFs and crude oil prices by using EGARCH-Copula approach" (2020). All Works. 1346.
https://zuscholars.zu.ac.ae/works/1346

Indexed in Scopus

yes

Open Access

no