TY - EJOU AU - Ngene, N. Geoffrey AU - Brodmann, B. Jennifer AU - Hassan, H. M. Kabir TI - DYNAMIC VOLATILITY AND SHOCK INTERACTIONS BETWEEN OIL AND THE U.S. ECONOMIC SECTORS T2 - Journal of Business Accounting and Finance Perspectives PY - 2019 VL - 1 IS - 1 SN - 2603-7475 AB - his study examines (i) the dynamic shocks and volatility interactions between each of the eleven U.S. economic sectors and the oil market; (ii) riskminimizing optimal capital allocations between each sector and oil; and (iii) the hedging effectiveness resulting from the inclusion of oil in each sector portfolio. Using weekly data spanning the period June 1994 through February 2016, we document the following regularities: (i) the conditional correlation between each sector and the oil market is time-varying and slowly decaying; (ii) there is either volatility or shock transmission from oil to each sector but not the reverse; and (iii) investors can minimize and hedge risk by allocating a portion of their wealth to oil commodities and forming a portfolio consisting of sector stocks and oil commodities. however, they will need to overweight their investment in sector stocks. Our findings indicate that oil commodities offer diversification potential to U.S. investors holding sector portfolios such as sector ETFs and mutual funds. Further, the risk parity portfolio weights significantly differ from the capital allocation weights. KW - Oil Market KW - Sectors KW - CCC model KW - EDCC-GARCh KW - portfolio diversification DO - 10.26870/jbafp.2018.01.002