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The time-varying spillover effect between WTI crude oil futures returns and hedge funds

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  • Zhang, Yue-Jun
  • Wu, Yao-Bin

Abstract

To capture the relationship change between WTI crude oil returns and hedge funds in recent years, the linear and nonlinear Granger causality test approaches and Hong's time-varying information spillover statistics are employed based on the data from 2006 to 2017. The empirical results indicate that, first, hedge funds' net positions may Granger cause crude oil futures returns in the linear manner but the nonlinear relationship appears weaker. Second, both in the linear and nonlinear manners, the influence of crude oil futures prices has been evidently strengthened when they experience high volatility whilst the influence of hedge funds' net positions appears stronger only when crude oil futures prices rise substantially. Finally, hedge funds play an important role in pushing up crude oil price bubbles which are responsible for the crash of crude oil prices in 2008, but the crash of oil prices in 2014 is more attributed to market fundamentals.

Suggested Citation

  • Zhang, Yue-Jun & Wu, Yao-Bin, 2019. "The time-varying spillover effect between WTI crude oil futures returns and hedge funds," International Review of Economics & Finance, Elsevier, vol. 61(C), pages 156-169.
  • Handle: RePEc:eee:reveco:v:61:y:2019:i:c:p:156-169
    DOI: 10.1016/j.iref.2019.02.006
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    Citations

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    Cited by:

    1. Wei, Yi-Ming & Qiao, Lu & Lv, Xin, 2020. "The impact of mergers and acquisitions on technology learning in the petroleum industry," Energy Economics, Elsevier, vol. 88(C).
    2. Qiao, Xingzhi & Zhu, Huiming & Hau, Liya, 2020. "Time-frequency co-movement of cryptocurrency return and volatility: Evidence from wavelet coherence analysis," International Review of Financial Analysis, Elsevier, vol. 71(C).
    3. Chen, Yufeng & Qu, Fang, 2019. "Leverage effect and dynamics correlation between international crude oil and China’s precious metals," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 534(C).
    4. Zhang, Yue-Jun & Yan, Xing-Xing, 2020. "The impact of US economic policy uncertainty on WTI crude oil returns in different time and frequency domains," International Review of Economics & Finance, Elsevier, vol. 69(C), pages 750-768.

    More about this item

    Keywords

    Crude oil futures; DCOT reports; Hedge funds; Time-varying granger causality;
    All these keywords.

    JEL classification:

    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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