Title
Uncertainty and crude oil returns
Document Type
Article
Publication Date
1-1-2016
Publication Title
Energy Economics
Volume
55
First page number:
92
Last page number:
100
Abstract
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 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. © 2016 Elsevier B.V.
Keywords
Copulas; Oil shocks; Uncertainty
Language
English
Repository Citation
Aloui, R.,
Gupta, R.,
Miller, S.
(2016).
Uncertainty and crude oil returns.
Energy Economics, 55
92-100.
http://dx.doi.org/10.1016/j.eneco.2016.01.012