Publications of Harald Kinateder
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Batten JA, Kinateder H, Szilagyi PG, Wagner NF. Liquidity, surprise volume and return premia in the oil market. Energy Economics. 2019;77:93-104.
Liquidity, surprise volume and return premia in the oil market
We investigate oil market price dynamics in the context of the Mixture of Distributions Hypothesis (MDH). Our econometric model addresses autoregressive properties in returns, the impact of surprise volume and conditional oil market return volatility as well as oil market liquidity in the conditional return equation. Surprise volume as a proxy of private information flow is shown to be unrelated to a set of standard market liquidity proxies. Oil return heteroscedasticity is found to be partly explained by surprise volume, a finding that is consistent with the MDH. Our findings further show that both oil market liquidity as well as surprise volume shocks are priced in the oil market. As such, lower levels of lagged market liquidity relate to above average conditional returns. Surprise volume shocks are associated with lower conditional oil market returns jointly with higher contemporaneous conditional return volatility. Lagged market liquidity dominates conditional volatility in predicting conditional oil price returns.
Batten JA, Kinateder H, Szilagyi PG, Wagner NF. Time-Varying Energy and Stock Market Integration in Asia. Energy Economics. 2019;80:777-92.
Time-Varying Energy and Stock Market Integration in Asia
The degree of integration between energy and stock markets is critical for the diversification, risk management and funding decisions of global corporations and investors alike. We investigate the integration relation between ten major Asian stock markets and a diversified energy portfolio that comprises oil, coal and gas. Estimation of the relation in a time-varying asset pricing framework, which allows for regime switching, identifies two major regimes. The first regime represents periods of low energy-stock market integration, where markets tend to be segmented. It accounts for over two-thirds of the sample period during December 1992 to December 2015. The second regime represents periods of high integration, as characterized by limited diversification opportunities and increased levels of volatility. Also, corporate funding conditions are less favorable in the second regime. The two regimes differ in the way equity markets price energy risk. In addition to a positive energy-unrelated equity risk premium during the low integration regime, our results identify a significant positive energy-related equity risk premium during the high integration regime. Finally, we demonstrate that investors can use the conditional information of our integration model to outperform passive portfolio investment strategies in the stock and energy markets.
Addressing COP21 using a Stock and Oil Market Integration Index Energy Policy
COP21 implementation should lead to a decline in the future demand for fossil fuels. One key implication for investors is how to best manage this risk. We construct a monthly integration index and then demonstrate that oil investors can offset adverse oil price risk by holding various 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 for these portfolios is critical to managing the time-varying degrees of integration that exist between oil and stock markets. Importantly, under normal market conditions, when markets are segmented, there is the opportunity for oil investors to diversify the additional energy price risk, caused by COP21, through the purchase of stocks. The optimal oil-stock diversified portfolio provides risk-adjusted positive benefits to investors, with the weightings changing over time as COP21 implementation proceeds.
Batten JA, Kinateder H, Szilagyi PG, Wagner NF. Can Stock Market Investors Hedge Energy Risk? Evidence from Asia. Energy Economics. 2017;66:559-70.
Can Stock Market Investors Hedge Energy Risk? Evidence from Asia
The relationship between energy and stock prices is investigated in the context of Asia, including China and Japan. Oil, gas and coal prices are considered both individually and as an energy portfolio. Consistent with evidence from international markets, during the post Global Financial Crisis (GFC) period, Asian stock markets moved in tandem with oil prices. However, using asset pricing and portfolio theory, we identify a time-varying integration between individual stock markets and the energy portfolio, which in turn may limit the benefit of risk reduction through diversification. This relation can also be used to hedge the common factor arising from energy risk. Doing so provides benefits to investors in the form of positive time-varying risk adjusted returns.