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DEPARTMENT OF ECONOMICS AND FINANCE COLLEGE OF BUSINESS AND ECONOMICS UNIVERSITY OF CANTERBURY CHRISTCHURCH, NEW ZEALAND Conditional Correlations and Volatility Spillovers Between Crude Oil and Stock Index Returns Roengchai Tansuchat, Chia-Lin Chang, Michael McAleer WORKING PAPER No. 4/2010 Department of Economics and Finance College of Business and Economics University of Canterbury Private Bag 4800, Christchurch New Zealand WORKING PAPER No. 4/2010 Conditional Correlations and Volatility Spillovers Between Crude Oil and Stock Index Returns 1 2 3 Roengchai Tansuchat , Chia-Lin Chang , Michael McAleer January, 2010 Abstract: This paper investigates the conditional correlations and volatility spillovers between crude oil returns and stock index returns. Daily returns from 2 January 1998 to 4 November 2009 of the crude oil spot, forward and futures prices from the WTI and Brent markets, and the FTSE100, NYSE, Dow Jones and SP500 index returns, are analysed using the CCC model of Bollerslev (1990), VARMA-GARCH model of Ling and McAleer (2003), VARMA-AGARCH model of McAleer, Hoti and Chan (2008), and DCC model of Engle (2002). Based on the CCC model, the estimates of conditional correlations for returns across markets are very low, and some are not statistically significant, which means the conditional shocks are correlated only in the same market and not across markets. However, the DCC estimates of the conditional correlatio