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Sources of volatility during four oil price crashes

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  • Baffes,John
  • Kshirsagar,Varun

Abstract

Previous sharp oil price declines have been accompanied by elevated ex post volatility. In contrast, volatility was much less elevated during the oil price crash in 2014/15. This paper provides evidence that oil prices declined in a relatively measured manner during 2014/15, with dispersion of price changes that was considerably smaller than comparable oil price declines. This finding is robust to nonparametric and GARCH measures of volatility. Further, the U.S. dollar appreciation exerted a strong influence on volatility during the recent crash; in contrast, the impact of shocks on equity markets was muted.

Suggested Citation

  • Baffes,John & Kshirsagar,Varun, 2015. "Sources of volatility during four oil price crashes," Policy Research Working Paper Series 7425, The World Bank.
  • Handle: RePEc:wbk:wbrwps:7425
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    Cited by:

    1. World Bank Group, 2015. "Commodity Markets Outlook, April 2015," World Bank Publications, The World Bank, number 21768.
    2. Jeng-Bau Lin & Chin-Chia Liang & Wei Tsai, 2019. "Nonlinear Relationships between Oil Prices and Implied Volatilities: Providing More Valuable Information," Sustainability, MDPI, Open Access Journal, vol. 11(14), pages 1-15, July.

    More about this item

    Keywords

    Debt Markets; Emerging Markets; Economic Conditions and Volatility; Markets and Market Access; Access to Markets;

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