Oil Shocks and Volatility Jumps
Konstantinos Gkillas (Gillas) (),
Rangan Gupta () and
Mark Wohar ()
No 201825, Working Papers from University of Pretoria, Department of Economics
In this paper, we analyse the role of oil price shocks, derived from expectations of consumers, economists, financial market, and policymakers, in predicting volatility jumps in the S&P500 over the monthly period of 1988:01 to 2015:02, with the jumps having been computed based on daily data over the same period. Standard linear Granger causality test fail to detect any evidence of oil shocks causing volatility jumps. But given strong evidence of nonlinearity and structural breaks between jumps and oil shocks, we next used a nonparametric causality-in-quantiles test, since the linear model is misspecified. Using this data-driven robust approach, we were able to detect overwhelming evidence of oil shocks predicting volatility jumps of the S&P500 over its entire conditional distribution, with the strongest effect observed at the lowest considered conditional quantile. Interestingly, the predictive ability of the four oil shocks on volatility jumps are found to be both qualitatively and quantitatively similar.
Keywords: S&P500; Volatility Jumps; Oil Shocks (search for similar items in EconPapers)
JEL-codes: C22 G10 Q02 (search for similar items in EconPapers)
Pages: 28 pages
New Economics Papers: this item is included in nep-ene and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5) Track citations by RSS feed
There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.
Journal Article: Oil shocks and volatility jumps (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:201825
Access Statistics for this paper
More papers in Working Papers from University of Pretoria, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Rangan Gupta ().