Crude oil price and implied volatility

Panos Fousekis

Studies in Economics and Finance, 2019, vol. 36, issue 2, 168-182

Abstract: Purpose - The purpose of this study is to investigate empirically the pattern of co-movement between prices and implied volatility in the future markets for crude oil. Design/methodology/approach - The tool of non-parametric quantile regression is applied to daily price returns and implied volatility changes from 2007 to 2018. Findings - For the total sample period, the link between price returns and forward-looking volatility expectations is contemporaneous, negative and asymmetric, and it exhibits an (approximately) inverted U-shaped pattern suggesting that: the pricing of implied volatility is heavier for large (in absolute value terms) changes relative to small ones and it is lighter for large positive changes relative to large negative ones. The pattern of co-movement, therefore, appears to be in line with the theoretical postulates of fear, exuberance and loss aversion. The main characteristics of the relationship are present in some (but not in all) sub-periods, which are also considered in this study. Originality/value - Less than a handful of works have assessed the link between implied volatility and prices for commodity ETFs. This is the first one relying on flexible non-parametric quantile regressions.

Keywords: Volatility; Non-parametric quantile regression; Oil prices; G10; C12 (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

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:eme:sefpps:sef-04-2018-0117

DOI: 10.1108/SEF-04-2018-0117

Access Statistics for this article

Studies in Economics and Finance is currently edited by Prof Niklas Wagner

More articles in Studies in Economics and Finance from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().