 Spikes and crashes in the oil marketSofiane Aboura and Julien Chevallier Post-Print from HAL Abstract: Over the last three decades, advanced economies have been facing a substantial rise not only in the crude oil price, but also in the oil price volatility. Quantifying the tail risk has become a prominent issue for investors and policy makers given the repeated spikes and crashes during previous years. This article reveals the existence of a tail risk hidden in the oil market by applying, for the first time, an extreme value theory analysis with a quantile regression procedure. An empirical test is carried out on the daily West Texas Intermediate (WTI) crude oil prices from 1983 to 2013. The main results indicate that the WTI becomes extreme from a daily variation of +5.0% and −10.0%. In addition, the maximum one-day variation which should be exceeded only once per century is +23% and −33%. Finally, the tail risk is overall borne by the oil-importing countries. The main policy implication of these findings is to design policy measures that consider the existence of price-volatility thresholds above/below which the oil market becomes unstable. Keywords: Crude oil market; Volatility; Quantile regression; Extreme value theory (search for similar items in EconPapers) Published in Research in International Business and Finance, 2016, 36, pp.615-623. ⟨10.1016/j.ribaf.2015.07.002⟩ There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-01348711 DOI: 10.1016/j.ribaf.2015.07.002 Access Statistics for this paper More papers in Post-Print from HAL |
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