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The effect of maturity, trading volume, and open interest on crude oil futures price range-based volatility

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  • Ripple, Ronald D.
  • Moosa, Imad A.

Abstract

The determinants of the volatility of crude oil futures prices are examined using an intra-day range-based measure of volatility. The paper employs two distinct approaches: one is to present a contract-by-contract analysis within the sample period, and the second is based on constructed series for the near-month and next-to-near-month contracts over the entire sample period. The contract-by-contract analysis reveals that trading volume and open interest are significant determinants of volatility that dominate the Samuelson maturity effect. The results support earlier findings of a positive and significant role for trading volume, and they also show the importance of open interest in determining volatility, exerting a significant negative effect. The full-period time series analysis also demonstrates the significant role played by open interest in the determination of futures price volatility, further confirming the importance of trading volume.

Suggested Citation

  • Ripple, Ronald D. & Moosa, Imad A., 2009. "The effect of maturity, trading volume, and open interest on crude oil futures price range-based volatility," Global Finance Journal, Elsevier, vol. 20(3), pages 209-219.
  • Handle: RePEc:eee:glofin:v:20:y:2009:i:3:p:209-219
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Souček, Michael, 2013. "Crude oil, equity and gold futures open interest co-movements," Energy Economics, Elsevier, vol. 40(C), pages 306-315.
    2. Elizabeth A. Maharaj & Imad Moosa & Jonathan Dark & Param Silvapulle, 2008. "Wavelet Estimation of Asymmetric Hedge Ratios: Does Econometric Sophistication Boost Hedging Effectiveness?," International Journal of Business and Economics, College of Business and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 7(3), pages 213-230, December.
    3. Elina Pradkhan, 2016. "Information Content of Trading Activity in Precious Metals Futures Markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 36(5), pages 421-456, May.
    4. repec:rjr:romjef:v::y:2017:i:2:p:45-61 is not listed on IDEAS
    5. Joseph, Anto & Sisodia, Garima & Tiwari, Aviral Kumar, 2014. "A frequency domain causality investigation between futures and spot prices of Indian commodity markets," Economic Modelling, Elsevier, vol. 40(C), pages 250-258.
    6. Saurabh Gupta & Prabina Rajib, 2012. "Samuelson Hypothesis & Indian Commodity Derivatives Market," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 19(4), pages 331-352, November.
    7. Zhang, Yue-Jun & Zhang, Lu, 2015. "Interpreting the crude oil price movements: Evidence from the Markov regime switching model," Applied Energy, Elsevier, vol. 143(C), pages 96-109.
    8. Walid Matar & Saud M. Al-Fattah & Tarek Atallah & Axel Pierru, 2013. "An introduction to oil market volatility analysis," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 37(3), pages 247-269, September.
    9. Alizadeh, Amir H. & Tamvakis, Michael, 2016. "Market conditions, trader types and price–volume relation in energy futures markets," Energy Economics, Elsevier, vol. 56(C), pages 134-149.

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