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

Abstract 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.

• Publication year

  2020

• Venue

  Physica A-statistical Mechanics and Its Applications

• Publication date

  2020-07-04

• Fields of study

  Mathematics, Economics

• Identifiers
  DOI 10.1016/j.physa.2020.124885
• External record

  Open on Semantic Scholar

• Source metadata

  Semantic Scholar

• No claims are published for this paper.

• No concepts are published for this paper.

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