Relationships According to Copula Model Between Volatility of Oil Price Returns and Returns of Thailand Stock Exchange Indices

Abstract

              This paper aims at studying the relationship of volatility by using copula model. The daily data from January 2007 to December 2016, totally of 10 years, are used in this study. The results show that Student-t Copula model is the best model for investigating the relationship between volatility of oil price returns and volatility of returns from the Thailand Stock Exchange Index. By using the model, it shows that there is tail dependence of left data and right data. It also shows that their relationship emerged during the very low volatility and the very high volatility, but their relationship is in low level. In addition, the study of relationship between volatility of oil price returns and volatility of returns from SET Energy & Utilities Sector Index, it can be seen that the best model is Normal Copula. The result indicates that there is no relationship between its tails. In short, the oil price returns cannot be a proper indicator of stock price index because oil price changes are slightly related to return from Thailand Stock Exchange Index.