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Oil vs. gasoline: The dark side of volatility and taxation

Author

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  • Sofiane Aboura

    () (CEPN - Centre d'Economie de l'Université Paris Nord - CNRS - Centre National de la Recherche Scientifique - USPC - Université Sorbonne Paris Cité - UP13 - Université Paris 13)

  • Julien Chevallier

    (IPAG Lab - IPAG Lab - Ipag)

Abstract

This paper investigates the relation between gasoline volatility and crude oil volatility. The objective is to examine whether the so-called asymmetric relation between gasoline and oil prices still holds for volatility, particularly, when considering the taxation effect. The approach hinges on the Volatility Threshold Dynamic Conditional Correlation (VT DCC) model. An application to the U.S. WTI oil volatility and the U.S. premium gasoline volatility is provided from 1990 to 2015. The main results reveal that oil volatility influences gasoline volatility, but without any form of asymmetry. The role of taxation seems to particularly affect the volatility of volatility for gasoline.

Suggested Citation

  • Sofiane Aboura & Julien Chevallier, 2016. "Oil vs. gasoline: The dark side of volatility and taxation," Post-Print halshs-01348705, HAL.
    • Handle: RePEc:hal:journl:halshs-01348705
    DOI: 10.1016/j.ribaf.2016.02.005
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-01348705
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    More about this item

    Keywords

    Volatility; Gasoline; Crude oil; Asymmetry; VT DCC; Taxation;

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • G1 - Financial Economics - - General Financial Markets
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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