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On the volatility of WTI crude oil prices: A time-varying approach with stochastic volatility

Thai-Ha Le, Sabri Boubaker, Manh Tien Bui and Donghyun Park

Energy Economics, 2023, vol. 117, issue C

Abstract: This study investigates the impacts of crude oil-market-specific fundamental factors and financial indicators on the realized volatility of West Texas Intermediate (WTI) crude oil price. A time-varying parameter vector autoregression model with stochastic volatility (TVP-VAR-SV) is applied to weekly data series spanning January 2008 to October 2021. It is found that the WTI oil price volatility responds positively to a shock in oil production, oil inventories, the US dollar index, and VIX but negatively to a shock in the US economic activity. The response to the EPU index was initially positive and then turned slightly negative before fading away. The VIX index has the most significant effect. Furthermore, the time-varying nature of the response of the WTI realized oil price volatility is evident. Extreme effects materialize during economic recessions and crises, especially during the COVID-19 pandemic. The findings can improve our understanding of the time-varying nature and determinants of WTI oil price volatility.

Keywords: West Texas intermediate (WTI); Realized crude oil price volatility; COVID-19 pandemic; Time-varying parameter vector autoregression model with stochastic volatility (TVP-VAR-SV); VIX (search for similar items in EconPapers)
JEL-codes: C22 Q43 (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations: View citations in EconPapers (7)

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Working Paper: On the Volatility of WTI Crude Oil Prices: A Time-Varying Approach with Stochastic Volatility (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:117:y:2023:i:c:s014098832200603x

DOI: 10.1016/j.eneco.2022.106474

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