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:: Volume 17, Issue 71 (Winter 1400 2022) ::
QEER 2022, 17(71): 37-66 Back to browse issues page
A Copula-based Quantile Model for Crude oil Return-Volatility Dependence Modelling: Case of Iran Heavy Oil
Mohammad Sayadi1, Mohsen Ebrahimi2, Atefeh Davari2
1- Kharazmi University , m.sayadi@khu.ac.ir
2- Kharazmi University
Abstract:   (985 Views)
The main purpose of this study is to investigate the relationship between Iran’s heavy crude oil price returns and volatility dependence using the Copula-based quantile model (CQM). CQM is an efficient tool for analyzing nonlinear time series models as it has no need for initial assumptions.  We use monthly data from January 1990 to December 2019. We use the Hadrick-Prescott filter to calculate oil price fluctuations and use quantiles in both quartile and percentile form. The Kolmogorov-Smirnov test and the descriptive statistics confirm the fat-tail distribution of the variables.  It is thus not possible to calculate a direct relationship between crude oil price return and volatility. Based on the results of CQM estimation, a positive and significant relationship is verified between crude oil price volatility and returns in quantiles (0.05, 0.1, 0.2, 0.25, 0.3, 0.8, 0.9, and 0.95) which relate to periods of instability and crisis (war and economic sanctions). This finding can be theoretically explained through the channel of the precautionary demand effect on the oil price. The hypothesis of equality of variances was rejected within different quantiles based on ANOVA test result. Moreover, there is a significant relationship between one-period lag of oil price volatility (Xt-1) and oil returns within different quantiles. Using these results, investors can more effectively manage the risk of investing in the oil market as well as other financial assets related to the oil market.
JEL Classification: Q31, Q43, F51, F52
Keywords: Return, Volatility, Quantile Copula Regression, Crude Oil Price

 
Keywords: Return, Volatility, Quantile Copula Regression, Crude Oil Price
Full-Text [PDF 773 kb]   (260 Downloads)    
Type of Study: Research | Subject: Oil-Market
Received: 2021/05/6 | Accepted: 2021/09/26 | Published: 2022/01/31 | ePublished: 2022/01/31
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Sayadi M, Ebrahimi M, Davari A. A Copula-based Quantile Model for Crude oil Return-Volatility Dependence Modelling: Case of Iran Heavy Oil. QEER. 2022; 17 (71) :37-66
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Volume 17, Issue 71 (Winter 1400 2022) Back to browse issues page
فصلنامه مطالعات اقتصاد انرژی Quarterly Energy Economics Review
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