Uncertainty and Crude Oil Returns
Riadh Aloui (),
Rangan Gupta () and
Stephen Miller ()
No 201503, Working Papers from University of Pretoria, Department of Economics
We use a copula approach to investigate the effect of uncertainty on crude-oil returns. Using copulas to construct multivariate distributions of time-series data permit the calculation of the dependence structure between the series independently of the marginal distributions. Further, we implement the copula estimation using a rolling window method to allow for a time-varying effect of equity and economic policy uncertainty on oil returns. The results show that higher uncertainty, as measured by equity and economic policy uncertainty indices, significantly increase crude-oil returns only during certain periods of time. That is, we find a positive dependence prior to and into the financial crisis and Great Recession, Interestingly, estimation of the copula over the entire sample period leads to a negative dependence between the equity and economic policy indices and the crude-oil return.
Keywords: Uncertainty; oil shocks; copulas (search for similar items in EconPapers)
Pages: 20 pages
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Journal Article: Uncertainty and crude oil returns (2016)
Working Paper: Uncertainty and crude oil returns (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:201503
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