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How does bad and good volatility spill over across petroleum markets?

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  • Jozef Barunik
  • Evzen Kocenda
  • Lukas Vacha

Abstract

We detect and quantify asymmetries in volatility spillovers using the realized semivariances of petroleum commodities: crude oil, gasoline, and heating oil. During the 1987--2014 period we document increasing spillovers from volatility among petroleum commodities that substantially change after the 2008 financial crisis. The increase in volatility spillovers correlates with the progressive financialization of the commodities. In terms of asymmetries in spillovers we show that periods of increasing crude oil prices strongly correlate with dominating spillovers due to bad volatility. Overall, bad volatility due to negative returns spills over among petroleum commodities to a much larger extent than good volatility due to positive returns. After the 2008 financial crisis the asymmetries in spillovers markedly declined in terms of total as well as directional spillovers. An analysis of directional spillovers further reveals that no commodity dominates other commodities in terms of spillover transmission in general.

Suggested Citation

  • Jozef Barunik & Evzen Kocenda & Lukas Vacha, 2014. "How does bad and good volatility spill over across petroleum markets?," Papers 1405.2445, arXiv.org.
  • Handle: RePEc:arx:papers:1405.2445
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    Cited by:

    1. Baumöhl, Eduard & Kočenda, Evžen & Lyócsa, Štefan & Výrost, Tomáš, 2018. "Networks of volatility spillovers among stock markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 490(C), pages 1555-1574.
    2. Baruník, Jozef & Kočenda, Evžen & Vácha, Lukáš, 2016. "Asymmetric connectedness on the U.S. stock market: Bad and good volatility spillovers," Journal of Financial Markets, Elsevier, vol. 27(C), pages 55-78.
    3. repec:prg:jnlpol:v:2018:y:2018:i:2:id:1185:p:218-239 is not listed on IDEAS
    4. repec:eee:revfin:v:35:y:2017:i:c:p:57-65 is not listed on IDEAS
    5. Křehlík, Tomáš & Baruník, Jozef, 2017. "Cyclical properties of supply-side and demand-side shocks in oil-based commodity markets," Energy Economics, Elsevier, vol. 65(C), pages 208-218.
    6. Baruník, Jozef & Kočenda, Evžen & Vácha, Lukáš, 2017. "Asymmetric volatility connectedness on the forex market," Journal of International Money and Finance, Elsevier, vol. 77(C), pages 39-56.
    7. Do, Hung Xuan & Brooks, Robert & Treepongkaruna, Sirimon & Wu, Eliza, 2016. "Stock and currency market linkages: New evidence from realized spillovers in higher moments," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 167-185.
    8. repec:eee:finana:v:52:y:2017:i:c:p:104-118 is not listed on IDEAS
    9. repec:eee:eneeco:v:66:y:2017:i:c:p:217-227 is not listed on IDEAS
    10. repec:eee:eneeco:v:66:y:2017:i:c:p:108-115 is not listed on IDEAS
    11. repec:fau:fauart:v:67:y:2017:i:3:p:250-275 is not listed on IDEAS

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