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Crude Oil Volatility: Hedgers or Investors

Author

Listed:
  • George Milunovich

    (Department of Economics, Macquarie University)

  • Ronald Ripple

    (Curtin Business School, Curtin University)

Abstract

We evaluate differential effects of the trading activity of two classes of traders: hedgers and general investors, on the volatility of the NYMEX crude oil futures returns. It appears that the rebalancing activity of oil hedgers has a significant and positive effect on the oil futures volatility. On the other hand, non-commercial players (investors) who take positions in the crude oil futures as well as stocks and bonds do not affect the crude oil volatility significantly by rebalancing their positions.

Suggested Citation

  • George Milunovich & Ronald Ripple, 2010. "Crude Oil Volatility: Hedgers or Investors," Economics Bulletin, AccessEcon, vol. 30(4), pages 2877-2883.
    • Handle: RePEc:ebl:ecbull:eb-10-00521
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    File URL: http://www.accessecon.com/Pubs/EB/2010/Volume30/EB-10-V30-I4-P264.pdf
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    More about this item

    Keywords

    Crude Oil Futures Volatility; Optimal Portfolio Weight; Hedge Ratio; GARCH; Time-Series; Effects of Investors and Hedgers;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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