Crude oil market and global financial crisis - structural break and market volatility analysis

Archana Singh and Narinder Pal Singh

International Journal of Economics and Business Research, 2017, vol. 13, issue 2, 203-216

Abstract: This research paper aims to analyse the impact of the recent global financial crisis on the volatility of crude spot market in India. The data has been collected for the period 2005 to 2014 from Multi Commodity Exchange, India. This paper first uses Ramsay RESET test to check the linearity of the relationship between spot and futures natural log returns. For structural break analysis, tests like Chow test, Chow forecast test, recursive estimates of CUSUM test and CUSUM of squares test have been performed on the monthly data of spot and futures price return series. No evidence of structural break was found in any test except CUSUM of squares test. Using EGARCH model with a dummy, we found that there was no effect of the global financial crisis on the volatility of crude spot market. The possible reason for the volatility of crude in 2008 could be financialisation of commodity exchanges and excessive speculation in crude oil futures.

Keywords: spot prices; futures prices; volatility; global financial crisis; crude oil markets; structural break; financialisation; stationarity; returns; stability test; India; speculation; crude oil futures; commodity exchanges. (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (2)

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