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The Effects of Oil Price Shocks on Stock Market Volatility: Evidence from European Data

Stavros Degiannakis, George Filis, and Renatas Kizys

Year: 2014
Volume: Volume 35
Number: Number 1
DOI: 10.5547/01956574.35.1.3
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The paper investigates the effects of oil price shocks on stock market volatility in Europe by focusing on three measures of volatility, i.e. the conditional, the realized and the implied volatility. The findings suggest that supply-side shocks and oil specific demand shocks do not affect volatility, whereas, oil price changes due to aggregate demand shocks lead to a reduction in stock market volatility. More specifically, the aggregate demand oil price shocks have a significant explanatory power on both current-and forward-looking volatilities. The results are qualitatively similar for the aggregate stock market volatility and the industrial sectors' volatilities. Finally, a robustness exercise using short-and long-run volatility models supports the findings.

How Do Oil Shocks Impact Energy Consumption? A Disaggregated Analysis for the U.S.

Thi Hong Van Hoang, Syed Jawad Hussain Shahzad, Robert L. Czudaj, and Javed Ahmad Bhat

Year: 2019
Volume: Volume 40
Number: The New Era of Energy Transition
DOI: 10.5547/01956574.40.SI1.thoa
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This paper investigates the interaction between energy consumption and oil shocks in the U.S. from 1974 to 2018 using monthly data. Its contributions rely on the double disaggregation of energy consumption and oil shocks in a time-varying context. Oil shocks are disaggregated into oil supply, oil demand and aggregated demand shocks following the method of Kilian (2009). Energy consumption is disaggregated according to the production source in distinguishing between renewable and non-renewable energy consumption (hydropower, geothermal, wood, waste, coal, natural gas and petroleum). The impulse response function results show that renewable energy consumption responds the most to aggregate demand and oil supply shocks while for non-renewable energy consumption, it is oil demand shocks. The dynamic connectedness results show that oil supply and demand shocks spillover the most to hydropower consumption while aggregate demand shocks spillover the less. However, these relationships change over time and recommend the flexibility of energy policies.

Modelling the Global Price of Oil: Is there any Role for the Oil Futures-spot Spread?

Daniele Valenti

Year: 2022
Volume: Volume 43
Number: Number 2
DOI: 10.5547/01956574.43.2.dval
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This paper illustrates the main benefits of accounting for the oil futures-spot spread in a Structural Vector Autoregressive model of the international market for crude oil. To this end, we replace the proxy for global above-ground crude oil inventories with the spread, which is derived by Brent crude futures prices with maturity 3-months. This model can be motivated on the basis of several economic considerations. First, the spread exploits the price discovery role in the crude oil futures markets. Second, the spread-based model alongside a proper set of identifying assumptions accounts for the presence of informational frictions and it allows for the feedback effect from futures to spot markets. Finally, the inventory proxy is affected by measurement error. The dynamic response functions show a positive relationship between the spread and the real price of oil, triggered by speculative shocks to financial markets. Moreover, this study provides a clear picture of the historical dynamic of the real price of oil and the spread during some of the exogenous events in the oil markets.

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