IDEAS home Printed from https://ideas.repec.org/p/pre/wpaper/201715.html
   My bibliography  Save this paper

The Impact of Macroeconomic News Surprises and Uncertainty of Major Economies on Returns and Volatility of Oil Futures

Author

Listed:
  • Walid Bahloul

    (Governance, Finance and Accounting Laboratory, Faculty of Business and Economics, University of Sfax, Sfax, Tunisia)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Pretoria, South Africa)

Abstract

Unlike the literature on macroeconomic news surprises and oil markets, which concentrates on spot prices and US news primarily, we analyze the impact of macroeconomic news surprises of Canada, Euro area, Japan, and UK (besides the US) on returns and volatility of oil futures for the West Texas Intermediate and Brent crude. We look at futures markets, since it is widely believe to predict the spot market movements. In addition, we also analyze possibility of asymmetric impact due to good and bad macroeconomic news surprises, as well as, the role of economic uncertainty of these economies in affecting the oil futures markets movements. We can draw two major conclusions: (a) Macroeconomic surprises, as well as uncertainties, of other economies (over and above that of the US) are found to be important in driving oil futures, with the effect of these other economies being relatively stronger than the US in some instances, and; (b) There is strong evidence of asymmetric effects, especially for volatility.

Suggested Citation

  • Walid Bahloul & Rangan Gupta, 2017. "The Impact of Macroeconomic News Surprises and Uncertainty of Major Economies on Returns and Volatility of Oil Futures," Working Papers 201715, University of Pretoria, Department of Economics.
  • Handle: RePEc:pre:wpaper:201715
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Aymen Belgacem & Anna Creti & Khaled Guesmi & Amine Lahiani, 2015. "Volatility spillovers and macroeconomic announcements: evidence from crude oil markets," Applied Economics, Taylor & Francis Journals, vol. 47(28), pages 2974-2984, June.
    2. Saghaian, Sayed H., 2010. "The Impact of the Oil Sector on Commodity Prices: Correlation or Causation?," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 42(3), pages 477-485, August.
    3. Balcilar, Mehmet & Gupta, Rangan & Wohar, Mark E., 2017. "Common cycles and common trends in the stock and oil markets: Evidence from more than 150years of data," Energy Economics, Elsevier, vol. 61(C), pages 72-86.
    4. Gupta, Rangan & Wohar, Mark, 2017. "Forecasting oil and stock returns with a Qual VAR using over 150years off data," Energy Economics, Elsevier, vol. 62(C), pages 181-186.
    5. Christiane Baumeister & Gert Peersman & Ine Van Robays, 2010. "The Economic Consequences of Oil Shocks: Differences across Countries and Time," RBA Annual Conference Volume (Discontinued), in: Renée Fry & Callum Jones & Christopher Kent (ed.),Inflation in an Era of Relative Price Shocks, Reserve Bank of Australia.
    6. Mohaddes, Kamiar & Pesaran, M. Hashem, 2017. "Oil prices and the global economy: Is it different this time around?," Energy Economics, Elsevier, vol. 65(C), pages 315-325.
    7. Bauwens, Luc & Ben Omrane, Walid & Giot, Pierre, 2005. "News announcements, market activity and volatility in the euro/dollar foreign exchange market," Journal of International Money and Finance, Elsevier, vol. 24(7), pages 1108-1125, November.
    8. Edda Claus & Iris Claus & Leo Krippner, 2014. "Asset markets and monetary policy shocks at the zero lower bound," Reserve Bank of New Zealand Discussion Paper Series DP2014/03, Reserve Bank of New Zealand.
    9. Guglielmo Maria Caporale & Fabio Spagnolo & Nicola Spagnolo, 2017. "Macro News and Commodity Returns," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 22(1), pages 68-80, January.
    10. Baffes, John, 2007. "Oil spills on other commodities," Resources Policy, Elsevier, vol. 32(3), pages 126-134, September.
    11. Arabinda Basistha & Alexander Kurov, 2015. "The Impact of Monetary Policy Surprises on Energy Prices," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 35(1), pages 87-103, January.
    12. Krippner, Leo, 2013. "Measuring the stance of monetary policy in zero lower bound environments," Economics Letters, Elsevier, vol. 118(1), pages 135-138.
    13. Lutz Kilian & Clara Vega, 2011. "Do Energy Prices Respond to U.S. Macroeconomic News? A Test of the Hypothesis of Predetermined Energy Prices," The Review of Economics and Statistics, MIT Press, vol. 93(2), pages 660-671, May.
    14. Arjun Chatrath & Hong Miao & Sanjay Ramchander, 2012. "Does the price of crude oil respond to macroeconomic news?," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 32(6), pages 536-559, June.
    15. Peersman, Gert & Van Robays, Ine, 2012. "Cross-country differences in the effects of oil shocks," Energy Economics, Elsevier, vol. 34(5), pages 1532-1547.
    16. Andreasson, Pierre & Bekiros, Stelios & Nguyen, Duc Khuong & Uddin, Gazi Salah, 2016. "Impact of speculation and economic uncertainty on commodity markets," International Review of Financial Analysis, Elsevier, vol. 43(C), pages 115-127.
    17. repec:dau:papers:123456789/15049 is not listed on IDEAS
    18. Aruoba, S. BoraÄŸan & Diebold, Francis X. & Scotti, Chiara, 2009. "Real-Time Measurement of Business Conditions," Journal of Business & Economic Statistics, American Statistical Association, vol. 27(4), pages 417-427.
    19. Dean Scrimgeour, 2015. "Commodity Price Responses to Monetary Policy Surprises," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 97(1), pages 88-102.
    20. Menzie D. Chinn & Olivier Coibion, 2014. "The Predictive Content of Commodity Futures," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 34(7), pages 607-636, July.
    21. Rosa, Carlo, 2014. "The high-frequency response of energy prices to U.S. monetary policy: Understanding the empirical evidence," Energy Economics, Elsevier, vol. 45(C), pages 295-303.
    22. Kishor, N. Kundan & Marfatia, Hardik A., 2013. "The time-varying response of foreign stock markets to U.S. monetary policy surprises: Evidence from the Federal funds futures market," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 24(C), pages 1-24.
    23. Dieter Hess & He Huang & Alexandra Niessen, 2008. "How do commodity futures respond to macroeconomic news?," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 22(2), pages 127-146, June.
    24. Baum, Christopher F. & Kurov, Alexander & Wolfe, Marketa Halova, 2015. "What do Chinese macro announcements tell us about the world economy?," Journal of International Money and Finance, Elsevier, vol. 59(C), pages 100-122.
    25. Scotti, Chiara, 2016. "Surprise and uncertainty indexes: Real-time aggregation of real-activity macro-surprises," Journal of Monetary Economics, Elsevier, vol. 82(C), pages 1-19.
    26. Roache, Shaun K. & Rossi, Marco, 2010. "The effects of economic news on commodity prices," The Quarterly Review of Economics and Finance, Elsevier, vol. 50(3), pages 377-385, August.
    27. Edda Claus & Iris Claus & Leo Krippner, 2016. "Monetary Policy Spillovers across the Pacific when Interest Rates Are at the Zero Lower Bound," Asian Economic Papers, MIT Press, vol. 15(3), pages 1-27, Fall.
    28. Andersen, Torben G. & Bollerslev, Tim & Diebold, Francis X. & Vega, Clara, 2007. "Real-time price discovery in global stock, bond and foreign exchange markets," Journal of International Economics, Elsevier, vol. 73(2), pages 251-277, November.
    29. Jun Cai & Yan‐Leung Cheung & Michael C. S. Wong, 2001. "What moves the gold market?," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 21(3), pages 257-278, March.
    30. Frankel, Jeffrey A & Hardouvelis, Gikas A, 1985. "Commodity Prices, Money Surprises and Fed Credibility," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 17(4), pages 425-438, November.
    31. Leo Krippner, 2015. "A comment on Wu and Xia (2015), and the case for two-factor Shadow Short Rates," CAMA Working Papers 2015-48, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    32. Scott W. Barnhart, 1989. "The Effects of Macroeconomic Announcements on Commodity Prices," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 71(2), pages 389-403.
    33. Rangan Gupta & Gbeada Josiane Seu Epse Kean & Mpho Asnath Tsebe & Nthabiseng Tsoanamatsie & João Ricardo Sato, 2014. "Time-Varying Causality between Oil and Commodity Prices in the Presence of Structural Breaks and Nonlinearity," Working Papers 201469, University of Pretoria, Department of Economics.
    34. John Elder, Hong Miao, and Sanjay Ramchander, 2013. "Jumps in Oil Prices: The Role of Economic News," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    35. Hess, Dieter E. & Huang, He & Niessen-Ruenzi, Alexandra, 2008. "How do commodity futures respond to macroeconomic news?," CFR Working Papers 08-03, University of Cologne, Centre for Financial Research (CFR).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Rangan Gupta & Christian Pierdzioch, 2021. "Forecasting the Volatility of Crude Oil: The Role of Uncertainty and Spillovers," Energies, MDPI, vol. 14(14), pages 1-15, July.
    2. Marfatia, Hardik A. & Gupta, Rangan & Cakan, Esin, 2021. "Dynamic impact of the U.S. monetary policy on oil market returns and volatility," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 159-169.
    3. Wang, Gaoshan & Yu, Guangjin & Shen, Xiaohong, 2021. "The effect of online environmental news on green industry stocks: The mediating role of investor sentiment," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 573(C).
    4. Ecenur Ugurlu‐Yildirim & Baris Kocaarslan & Beyza M. Ordu‐Akkaya, 2021. "Monetary policy uncertainty, investor sentiment, and US stock market performance: New evidence from nonlinear cointegration analysis," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 1724-1738, April.
    5. Maghyereh, Aktham & Abdoh, Hussein, 2020. "The tail dependence structure between investor sentiment and commodity markets," Resources Policy, Elsevier, vol. 68(C).
    6. Konstantinos Gkillas & Dimitrios Vortelinos & Christos Floros & Athanasios Tsagkanos, 2019. "Economic News Releases and Financial Markets in South Africa," Economies, MDPI, vol. 7(4), pages 1-13, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Smales, L.A., 2017. "Commodity market volatility in the presence of U.S. and Chinese macroeconomic news," Journal of Commodity Markets, Elsevier, vol. 7(C), pages 15-27.
    2. Tarek Chebbi, 2021. "The response of precious metal futures markets to unconventional monetary surprises in the presence of uncertainty," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 1897-1916, April.
    3. Marfatia, Hardik A. & Gupta, Rangan & Cakan, Esin, 2021. "Dynamic impact of the U.S. monetary policy on oil market returns and volatility," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 159-169.
    4. Aymen Belgacem & Anna Creti & Khaled Guesmi & Amine Lahiani, 2015. "Volatility spillovers and macroeconomic announcements: evidence from crude oil markets," Applied Economics, Taylor & Francis Journals, vol. 47(28), pages 2974-2984, June.
    5. Smales, L.A. & Lucey, B.M., 2019. "The influence of investor sentiment on the monetary policy announcement liquidity response in precious metal markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 60(C), pages 19-38.
    6. Olivier Rousse & Benoît Sévi, 2016. "Informed Trading in Oil-Futures Market," Working Papers hal-01410093, HAL.
    7. Sun Young Kim & Kyung Yoon Kwon, 2021. "Does economic uncertainty matter in international commodity futures markets?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(1), pages 849-869, January.
    8. Chiou-Wei, Song-Zan & Chen, Sheng-Hung & Zhu, Zhen, 2020. "Natural gas price, market fundamentals and hedging effectiveness," The Quarterly Review of Economics and Finance, Elsevier, vol. 78(C), pages 321-337.
    9. Rosa, Carlo, 2014. "The high-frequency response of energy prices to U.S. monetary policy: Understanding the empirical evidence," Energy Economics, Elsevier, vol. 45(C), pages 295-303.
    10. Mr. Shaun K. Roache & Mr. Marco Rossi, 2009. "The Effects of Economic News on Commodity Prices: Is Gold Just Another Commodity?," IMF Working Papers 2009/140, International Monetary Fund.
    11. Kurov, Alexander & Stan, Raluca, 2018. "Monetary policy uncertainty and the market reaction to macroeconomic news," Journal of Banking & Finance, Elsevier, vol. 86(C), pages 127-142.
    12. Roache, Shaun K. & Rossi, Marco, 2010. "The effects of economic news on commodity prices," The Quarterly Review of Economics and Finance, Elsevier, vol. 50(3), pages 377-385, August.
    13. Kam Fong Chan & Philip Gray, 2017. "Do Scheduled Macroeconomic Announcements Influence Energy Price Jumps?," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 37(1), pages 71-89, January.
    14. Smales, L.A., 2019. "Slopes, spreads, and depth: Monetary policy announcements and liquidity provision in the energy futures market," International Review of Economics & Finance, Elsevier, vol. 59(C), pages 234-252.
    15. Charlot, Philippe & Marimoutou, Vêlayoudom, 2014. "On the relationship between the prices of oil and the precious metals: Revisiting with a multivariate regime-switching decision tree," Energy Economics, Elsevier, vol. 44(C), pages 456-467.
    16. Katherine B. Ensor & Yu Han & Barbara Ostdiek & Stuart M. Turnbull, 2020. "Dynamic jump intensities and news arrival in oil futures markets," Journal of Asset Management, Palgrave Macmillan, vol. 21(4), pages 292-325, July.
    17. Bannigidadmath, Deepa & Narayan, Paresh Kumar, 2021. "Economic news and the cross-section of commodity futures returns," Journal of Behavioral and Experimental Finance, Elsevier, vol. 31(C).
    18. Kam F. Chan & Philip Gray, 2018. "Volatility jumps and macroeconomic news announcements," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 38(8), pages 881-897, August.
    19. Bariviera, Aurelio F. & Font-Ferrer, Alejandro & Sorrosal-Forradellas, M. Teresa & Rosso, Osvaldo A., 2019. "An information theory perspective on the informational efficiency of gold price," The North American Journal of Economics and Finance, Elsevier, vol. 50(C).
    20. Nikolay Gospodinov & Ibrahim Jamali, 2018. "Monetary policy uncertainty, positions of traders and changes in commodity futures prices," European Financial Management, European Financial Management Association, vol. 24(2), pages 239-260, March.

    More about this item

    Keywords

    Macroeconomic news surprises; Uncertainty; Oil Futures; Returns and Volatility;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pre:wpaper:201715. 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: . General contact details of provider: https://edirc.repec.org/data/decupza.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Rangan Gupta (email available below). General contact details of provider: https://edirc.repec.org/data/decupza.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.