Does solar activity affect the price of crude oil? A causality and volatility analysis

Theodoros Daglis, Stavroula Yfanti, Panos Xidonas, Konstantinos Konstantakis and Panayotis Michaelides

Finance Research Letters, 2023, vol. 55, issue PA

Abstract: This study examines how solar activity affects the oil volatility index. To test whether solar phenomena affect the oil volatility price index, the Granger and Step-by-Step causality techniques are applied. Furthermore, we employ the autoregressive distributed lag order model (ARDL), which introduces as exogenous variables the Dow Jones Equity REIT index, the 3-month U.S. Government bond, the Oil Volatility Index, and the spread. As part of the model, we also include a solar variable, namely, the solar wind velocity, which is one of the most significant characteristics of the solar wind plasma. According to the results, the solar wind velocity "Granger causes" and "step-by-step causes" the oil volatility price index. All variables analyzed provide useful information for the modeling of the oil volatility index, which shows that solar activity does indeed influence the market for oil prices.

Keywords: Oil volatility index; Solar wind; ARDL; Macroeconomic variables (search for similar items in EconPapers)
JEL-codes: C22 C50 C51 C58 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:55:y:2023:i:pa:s1544612323002064

DOI: 10.1016/j.frl.2023.103833

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