OPEC news and predictability of oil futures returns and volatility: Evidence from a nonparametric causality-in-quantiles approach

Rangan Gupta and Seong-Min Yoon

The North American Journal of Economics and Finance, 2018, vol. 45, issue C, 206-214

Abstract: This paper provides a novel perspective to the predictive ability of OPEC meeting dates and production announcements for (Brent Crude and West Texas Intermediate) oil futures market returns and GARCH-based volatility using a nonparametric quantile-based methodology. We show a nonlinear relationship between oil futures returns and OPEC-based predictors; hence, linear Granger causality tests are misspecified and the linear model results of non-predictability are unreliable. When the quantile-causality test is implemented, we observe that the impact of OPEC variables is restricted to Brent Crude futures only (with no effect observed for the WTI market). Specifically, OPEC production announcements, and meeting dates predict only lower quantiles of the conditional distribution of Brent futures market returns. While, predictability of volatility covers the majority of the quantile distribution, barring extreme ends.

Keywords: Oil futures markets; Returns and volatility; OPEC announcements; Nonparametric quantile causality (search for similar items in EconPapers)
JEL-codes: C22 C58 G14 Q41 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

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Related works:
Working Paper: OPEC News and Predictability of Oil Futures Returns and Volatility: Evidence from a Nonparametric Causality-in-Quantiles Approach (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:45:y:2018:i:c:p:206-214

DOI: 10.1016/j.najef.2018.02.010

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