Year of Graduation
Do Exchange Rate and Oil Price Still Explain RTS Movements? Multi-Scale Approach
Financial Markets and Financial Institutions
This paper examines the relationship between the dynamics of the Russian stock market (RTS), oil prices, USDRUB rate, industrial metals index (LMEX) and international indices in the time period from January 2012 to April 2019. The selected period is saturated with a large number of economic and political events that can have a significant impact on the internal structure of the relationship between the variables under study. This work will be relevant for portfolio managers in terms of financial risk management and for policymakers in terms of its implementation. The work is divided into 3 main sections. In the first section: the existence of a long-term equilibrium between the RTS index, oil prices, and USDRUB rate is tested using Johansen’s test, then VAR model is constructed to find a short-term dependence on the general sample. Next, the data breakpoint is defined, which divides the main sample into 2 subsamples. After determining the subsamples, the same methodology is used for them as for the general sample in order to find long-term and short-term interdependencies between the variables. The main conclusions of the first section: on all considered samples there is no long-term equilibrium between variables, the identified short-term dependence of the RTS index on oil prices in the general sample is replaced by dependence on USDRUB rate when considering subsample 2 on, there is a steady positive dependence of the RTS index on the US stock market confirmed on all samples. In the second section, we evaluate the dynamic correlations using the DCC-MGARCH model. The obtained correlation values are very volatile. There is a sharp decrease in the absolute value of the correlation between the RTS index and oil prices, the RTS index and the S & P index at the time of introducing a new package of sanctions against Russia for consideration by the US Congress in mid-2018, but by 2019 the movement is turning and gradually recovers. The third section provides a calculation of the time-dependent internal correlation (TDIC) based on a complete ensemble decomposition into empirical modes with adaptive noise (CEEMDAN), with which the conclusions of parts 1 and 2 were tested at different time scales. The results are consistent, moreover, it turned out that dependence on oil decreased mainly in the short and long term, and the relationship with the USDRUB rate increased mainly in the medium term horizon.