EconPapers    
Economics at your fingertips  
 

Oil prices and news-based uncertainty: Novel evidence

Zhi Su, Man Lu and Libo Yin

Energy Economics, 2018, vol. 72, issue C, 331-340

Abstract: In this paper, using news implied volatility (NVIX) as a key variable to measure news-based uncertainty, we investigate whether the world price of oil and three classical oil shocks affect news-based uncertainty, or vice versa. Our analysis is conducted through the news mechanism that is unrelated to fundamentals. This research contributes to the literature on the effect of oil prices on news-based uncertainty by studying the dynamics, in both the time and frequency domains, using the wavelet coherence analysis. Our results illustrate that oil prices exhibit a statistically and economically significant leading role on NVIX, especially in the long run. Further, we distinguish the different impacts of oil shocks and find that the oil supply and aggregate demand shocks usually play a leading role on relatively long-term NVIX while the oil specific demand shocks are sensitive to the fluctuations of NVIX. We also find that the rules of comovement between oil prices (oil shocks) and news-based uncertainty change at different frequencies and times. They usually move together in opposite directions with the exception of the oil supply shocks and NVIX. These findings apply to both oil spot and futures markets. Our results present new and interesting implications for investors and policy makers by supporting the news reallocation channel as an important transmission mechanism from oil markets.

Keywords: News implied volatility; News-based uncertainty; Oil prices; Oil shocks; Wavelet coherence analysis (search for similar items in EconPapers)
JEL-codes: Q43 Q02 E44 C58 G12 D83 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0140988318301464
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:72:y:2018:i:c:p:331-340

Access Statistics for this article

Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2019-04-13
Handle: RePEc:eee:eneeco:v:72:y:2018:i:c:p:331-340