Exploring the Relationship Between Oil Price Returns and Selected Insurance Company Stocks on the Iraqi Stock Exchange Using DCC Model and Wavelet Analysis

Abstract

This study analyzes the index returns of selected insurance company stocks (NAME and NGIR) and Brent oil (OIL) from the Iraqi stock market between early 2012 and mid-2024, using MATLAB and R software at a 95% confidence level. The findings indicate low volatility stability with a mean-reverting property, as evidenced by the parameters of the Bayesian DCC model, which show significant variable correlations over time. It was found that short-term volatility for NGIR and NAME is less stable than long-term volatility, and previous period values significantly influence current correlations more than shocks do. The analysis suggests that changes in trading strategies can create turbulence in stock returns. The study highlights varying impacts of shocks on volatility, indicating high risk and uncertainty in the market. Based on these results, it is recommended that investors avoid holding NGIR and NAME simultaneously in a portfolio during long-term fluctuations, while suggesting that Oil and NGIR stocks be held together during short-term fluctuations due to their strong negative correlation.