IDEAS home Printed from https://ideas.repec.org/a/eme/sefpps/sef-04-2018-0117.html
   My bibliography  Save this article

Crude oil price and implied volatility

Author

Listed:
  • Panos Fousekis

Abstract

Purpose - The purpose of this study is to investigate empirically the pattern of co-movement between prices and implied volatility in the future markets for crude oil. Design/methodology/approach - The tool of non-parametric quantile regression is applied to daily price returns and implied volatility changes from 2007 to 2018. Findings - For the total sample period, the link between price returns and forward-looking volatility expectations is contemporaneous, negative and asymmetric, and it exhibits an (approximately) inverted U-shaped pattern suggesting that: the pricing of implied volatility is heavier for large (in absolute value terms) changes relative to small ones and it is lighter for large positive changes relative to large negative ones. The pattern of co-movement, therefore, appears to be in line with the theoretical postulates of fear, exuberance and loss aversion. The main characteristics of the relationship are present in some (but not in all) sub-periods, which are also considered in this study. Originality/value - Less than a handful of works have assessed the link between implied volatility and prices for commodity ETFs. This is the first one relying on flexible non-parametric quantile regressions.

Suggested Citation

  • Panos Fousekis, 2019. "Crude oil price and implied volatility," Studies in Economics and Finance, Emerald Group Publishing Limited, vol. 36(2), pages 168-182, May.
    • Handle: RePEc:eme:sefpps:sef-04-2018-0117
    DOI: 10.1108/SEF-04-2018-0117
    as

    Download full text from publisher

    File URL: https://www.emerald.com/insight/content/doi/10.1108/SEF-04-2018-0117/full/html?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://www.emerald.com/insight/content/doi/10.1108/SEF-04-2018-0117/full/pdf?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1108/SEF-04-2018-0117?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Dimitrios Panagiotou, 2021. "Re-examining the leverage effect and gold’s safe haven properties with the utilization of the implied volatility of gold: a non-parametric quantile regression approach," SN Business & Economics, Springer, vol. 1(7), pages 1-18, July.
    2. Yang, Kun & Wei, Yu & Li, Shouwei & Liu, Liang & Wang, Lei, 2021. "Global financial uncertainties and China’s crude oil futures market: Evidence from interday and intraday price dynamics," Energy Economics, Elsevier, vol. 96(C).
    3. Fassas, Athanasios P. & Siriopoulos, Costas, 2021. "Implied volatility indices – A review," The Quarterly Review of Economics and Finance, Elsevier, vol. 79(C), pages 303-329.

    More about this item

    Keywords

    Volatility; Non-parametric quantile regression; Oil prices; G10; C12;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:sefpps:sef-04-2018-0117. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Emerald Support (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.