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Geopolitical uncertainty and crude oil volatility: Evidence from oil-importing and oil-exporting countries

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  • Pan, Zhiyuan
  • Huang, Xiao
  • Liu, Li
  • Huang, Juan

Abstract

By disentangling the effects of the oil-importing and oil-exporting countries, this paper sheds new light on the relationship between crude oil volatility and country specific geopolitical risks using the popular generalized autoregressive conditional heteroskedasticity with mixed data sampling model(GARCH-MIDAS, hereafter) of Engle et al. (2013). We show that crude oil future volatility is more strongly related to the geopolitical risks of oil-importing countries than to that of oil-exporting countries, especially China. The models exploiting this finding lead to significantly better out-of-sample forecast performance and thus have more economic benefit.

Suggested Citation

  • Pan, Zhiyuan & Huang, Xiao & Liu, Li & Huang, Juan, 2023. "Geopolitical uncertainty and crude oil volatility: Evidence from oil-importing and oil-exporting countries," Finance Research Letters, Elsevier, vol. 52(C).
    • Handle: RePEc:eee:finlet:v:52:y:2023:i:c:s1544612322007413
    DOI: 10.1016/j.frl.2022.103565
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    Cited by:

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    4. Aharon, David Y. & Aziz, Mukhriz Izraf Azman & Nor, Safwan Mohd, 2023. "Cross-country study of the linkages between COVID-19, oil prices, and inflation in the G7 countries," Finance Research Letters, Elsevier, vol. 57(C).

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    More about this item

    Keywords

    Geopolitical uncertainty; Crude oil volatility; Oil-importing countries; Oil-exporting countries;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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