Static and Dynamic Connectedness Between OPEC Oil Prices and Indian Equities: A Sectoral Analysis

This article analyzes the static and dynamic connectedness between Organization of the Petroleum Exporting Countries (OPEC) oil prices and selected Indian sectoral equity indices from January 2011 to November 2022. The returns and volatility spillovers are measured using the method proposed by Antonakakis et al. (2020, Journal of Risk and Financial Management , 13 (4), 84), which utilizes the time-varying parameter-vector autoregression model. It is an improvement over the Diebold and Yilmaz (2012, International Journal of Forecasting , 28 (1), 57–66) connectedness model. The findings indicate that total connectedness, in terms of volatility and returns, was high during the oil price glut in 2014–2015 and the COVID-19 crisis in 2020. Also, it was found that return connectedness is greater than volatility connectedness. OPEC oil prices being the net receiver of transmissions rather than the net transmitter is another interesting result.