Crude Oil Volatility: Hedgers or Investors

George Milunovich and Ronald Ripple (ripron@gmail.com)

Economics Bulletin, 2010, vol. 30, issue 4, 2877-2883

Abstract: We evaluate differential effects of the trading activity of two classes of traders: hedgers and general investors, on the volatility of the NYMEX crude oil futures returns. It appears that the rebalancing activity of oil hedgers has a significant and positive effect on the oil futures volatility. On the other hand, non-commercial players (investors) who take positions in the crude oil futures as well as stocks and bonds do not affect the crude oil volatility significantly by rebalancing their positions.

Keywords: Crude Oil Futures Volatility; Optimal Portfolio Weight; Hedge Ratio; GARCH; Time-Series; Effects of Investors and Hedgers (search for similar items in EconPapers)
JEL-codes: G1 Q4 (search for similar items in EconPapers)
Date: 2010-11-03
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