Exploring the dynamic relationship between crude oil price and implied volatility indices: A MF-DCCA approach

Yuxin Cai, Xinsheng Lu, Yongping Ren and Ling Qu

Physica A: Statistical Mechanics and its Applications, 2019, vol. 536, issue C

Abstract: This paper investigates the cross-correlation between crude oil prices and implied volatility indices — theinvestor’s fear gauges, using a cross-correlation statistical test and multifractal detrended cross-correlation analysis (MF-DCCA). The results show that the cross-correlations between crude oil prices and three different implied volatility indices are multifractal. By finding the “crossover”, we separate the three pairs of series into the short- and long-term, respectively, and find that the cross-correlations are strongly anti-persistent in both short- and long-term. Moreover, cross-correlations of small and large fluctuations are anti-persistent in the short- and long-term, suggesting that crude oil prices and implied volatility indices are susceptible to each other. We also find that the cross-correlation exponents are less than the average generalized Hurst exponent when q<0 and more than the average generalized Hurst exponent when q>0 in the short-term and that the opposite results are true in the long-term.

Keywords: Cross-correlations; MF-DCCA; Crude oil; Implied volatility indices (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:536:y:2019:i:c:s0378437119305771

DOI: 10.1016/j.physa.2019.04.209

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