Hedgers, Investors and Futures Return Volatility: the Case of NYMEX Crude Oil
We present a new model to evaluate the volatility of futures returns. The model is a combination of Dynamic Conditional Correlation and an augmented EGARCH, which allows us to evaluate the differential effects of the trading activity of two classes of optimizing traders. We apply the model to the NYMEX crude oil futures contract, and we find that the rebalancing activity of hedgers has a significant and positive effect on returns volatility. However, we also find that the rebalancing activity attributable to crude oil futures for non-hedging investors has no significant effect.
|Date of creation:||Oct 2006|
|Date of revision:|
|Contact details of provider:|| Postal: Sydney NSW 2109|
Web page: http://www.econ.mq.edu.au/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:mac:wpaper:0607. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Helen Boneham)
If references are entirely missing, you can add them using this form.