Oil price risk exposure of BRIC stock markets and hedging effectiveness

Syed Jawad Hussain Shahzad, Elie Bouri, Mobeen Ur Rehman, Muhammad Abubakr Naeem, Tareq Saeed

Research output: Contribution to journalArticlepeer-review

27 Citations (Scopus)


We study the tail dependence between crude oil and BRIC stock markets using a time-varying optimal copula (TVOC) approach. We show evidence of multiple tail dependence regimes, suggesting that simple static or dynamic copula specifications do not fully characterize the extreme dependence between oil and BRIC stock markets. The identified combinations of asymmetric and extreme positive lower tail dependence justify the application of the TVOC. Interestingly, the positive lower tail dependence between oil and stock markets and risk spillover from oil is higher for Brazil and Russia (oil exporters) than India and China (oil importers). Finally, we assess the effectiveness of hedging and measure the conditional diversification benefits of investing in oil for BRIC stock indices. Notably, the Chinese and Indian equity markets offer higher conditional diversification benefits when combined with oil in an equally weighted portfolio.

Original languageEnglish
Pages (from-to)145-170
Number of pages26
JournalAnnals of Operations Research
Issue number1
Publication statusPublished - Jun 2022
Externally publishedYes


  • BRIC
  • Crude oil
  • Diversification
  • Hedging
  • Time-varying optimal copula

ASJC Scopus subject areas

  • General Decision Sciences
  • Management Science and Operations Research


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