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Time-Varying Volatility Feedback of Energy Prices: Evidence from Crude Oil, Petroleum Products, and Natural Gas Using a TVP-SVM Model

Yong Jiang (), Chao-Qun Ma (), Xiao-Guang Yang () and Yi-Shuai Ren ()
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Yong Jiang: Business School, Hunan University, Changsha 410082, China
Chao-Qun Ma: Business School, Hunan University, Changsha 410082, China
Xiao-Guang Yang: Academy of Mathematics and Systems Science, Chinese Academy of Sciences, Beijing 100190, China
Yi-Shuai Ren: Business School, Hunan University, Changsha 410082, China

Sustainability, 2018, vol. 10, issue 12, 1-17

Abstract: : In this paper, the time-varying volatility feedback of nine series of energy prices is researched by employing the time-varying parameter stochastic volatility in mean (TVP-SVM) model. The major findings and conclusions can be grouped as follows: Significant differences exist in the time-varying volatility feedback among the nine major energy productions. Specifically, crude oil and diesel’s price volatility has a remarkable positive time-varying effect on their returns. Yet the returns, for natural gas and most petroleum products are negatively affected by their price volatility over time. Furthermore, obvious structural break features exist in the time-varying volatility feedback of energy prices, which coincide with the breakpoints in the energy volatility. This indicates that some factors such as major global economic and geopolitical events that cause the sudden structural breaks in the energy volatility may also affect the volatility feedback of the energy price. Moreover, the volatility feedback in energy price will become weak and even have no impact on energy returns in some special periods when the energy price volatility is extremely high.

Keywords: crude oil; natural gas; petroleum product; structural breaks; time-varying volatility feedback; TVP-SVM model (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2018
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