Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/210023
Authors: 
Lombardi, Marco J.
Ravazzolo, Francesco
Year of Publication: 
2012
Series/Report no.: 
Working Paper 2012/24
Abstract: 
In the recent years several commentators hinted at an increase of the correlation between equity and commodity prices, and blamed investment in commodity-related products for this. First, this paper investigates such claims by looking at various measures of correlation. Next, we assess to what extent correlations between oil and equity prices can be exploited for asset allocation. We develop a time-varying Bayesian Dynamic Conditional Correlation model for volatilities and correlations and find that joint modelling of oil and equity prices produces more accurate point and density forecasts for oil which lead to substantial benefits in portfolio wealth.
Subjects: 
Bayesian DCC
Bayesian dynamic conditional correlation
oil price
stock price
density forecasting
correlation
JEL: 
C11
C15
C53
E17
G17
Persistent Identifier of the first edition: 
ISBN: 
978-82-7553-713-1
Creative Commons License: 
https://creativecommons.org/licenses/by-nc-nd/4.0/deed.no
Document Type: 
Working Paper
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