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Oil vs. gasoline: The dark side of volatility and taxation

Sofiane Aboura () and Julien Chevallier

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Abstract: This paper investigates the relation between gasoline volatility and crude oil volatility. The objective is to examine whether the so-called asymmetric relation between gasoline and oil prices still holds for volatility, particularly, when considering the taxation effect. The approach hinges on the Volatility Threshold Dynamic Conditional Correlation (VT DCC) model. An application to the U.S. WTI oil volatility and the U.S. premium gasoline volatility is provided from 1990 to 2015. The main results reveal that oil volatility influences gasoline volatility, but without any form of asymmetry. The role of taxation seems to particularly affect the volatility of volatility for gasoline.

Keywords: Volatility; Gasoline; Crude oil; Asymmetry; VT DCC; Taxation (search for similar items in EconPapers)
Date: 2016-02-26
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-01348705
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Published in Research in International Business and Finance, Elsevier, 2016, ⟨10.1016/j.ribaf.2016.02.005⟩

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