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The nexus between geopolitical uncertainty and crude oil markets: An entropy-based wavelet analysis

Gazi Uddin (), Stelios Bekiros and Ali Ahmed

Physica A: Statistical Mechanics and its Applications, 2018, vol. 495, issue C, 30-39

Abstract: The global financial crisis and the subsequent geopolitical turbulence in energy markets have brought increased attention to the proper statistical modeling especially of the crude oil markets. In particular, we utilize a time–frequency decomposition approach based on wavelet analysis to explore the inherent dynamics and the casual interrelationships between various types of geopolitical, economic and financial uncertainty indices and oil markets. Via the introduction of a mixed discrete-continuous multiresolution analysis, we employ the entropic criterion for the selection of the optimal decomposition level of a MODWT as well as the continuous-time coherency and phase measures for the detection of business cycle (a)synchronization. Overall, a strong heterogeneity in the revealed interrelationships is detected over time and across scales.

Keywords: Uncertainty measurement; Energy markets; Multiscale analysis; Phase difference; Entropy (search for similar items in EconPapers)
JEL-codes: C14 C32 C51 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1016/j.physa.2017.12.025

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