ASSESSING FOR TIME VARIATION IN OIL RISK PREMIA: AN ADCC-GARCH-CAPM INVESTIGATION
DOI :
https://doi.org/10.15173/esr.v21i2.2766Mots-clés :
oil price, systematic risk, risk premium, ADCC-GARCH-CAPMRésumé
This paper focuses on oil market dynamics through the investigation of oil systematic risk and oil risk premium dynamics over the period 1997-2012, which includes several different economic episodes, enabling us to capture a considerable number of statistical properties for oil prices. Interestingly, unlike previous studies, the authors retained data for several developed and emerging oil markets and used different oil prices in order to provide a comprehensive and wide-ranging vision of oil price dynamics. To this end and in order to take eventual time variation and asymmetry in oil price dynamics into account, the authors applied recent econometrics tests associated with the ADCC-GARCH class of model. This modelling enabled us to appropriately specify the dynamics of oil conditional variance and time-varying oil risk premium. Accordingly, this study offers three interesting findings. First, the hypotheses of asymmetry and time variation in oil risk premia are not rejected. Second, the recent global financial crisis has increased systematic oil risk and oil risk premia in different regions. Finally, oil risk premia in emerging countries are significantly higher than those in developed countries, suggesting the inclusion of additional premium induced by political instability and geopolitical changes in emerging economies.Références
REFERENCES
Ajmi, N., Elmontasser, G., Hammoudeh, S, and Nguyen, D. (2014), "Oil prices and MENA stock markets: new evidence from nonlinear and asymmetric causalities during and after the crisis period", Applied Economics, Vol. 46, 18.
Alquist, R., Bauer, G., H. and Diez de los Rios A. (2013), "Macroeocnomic Drivers of Crude Oil Futures Risk Premia", Working Paper, Bank of Canada.
Arouri, M. Fouquau, J.(2009) On the short-term influence of oil price changes on stock markets in GCC countries: linear and nonlinear analyses , Economics Bulletin, vol. 29, pp. 806-815.
Bollerslev, T. (1986). Generalized autoregressive conditional heteroskedasticity. Journal of Econometrics, 31, 307-327.
Cappiello, L., Engle, R. F. and Sheppard, K. (2006), "Asymmetric Dynamics in the Correlations of Global Equity and Bond Returns," Journal of Financial Econometrics, vol. 4, No. 4, 537-572
Chevallier, J. and Sévi, B. (2013), "A Fear Index to Predict Oil Futures Returns", Energy Studies Review, 20(3):1-17
Clem A.(1985), Commodity price volatility: trends during 1975-84, Working Paper, Bureau of Labor Statistics.
Deaves, R. and Krinsky, I. ( 1995), Do futures prices for commodities embody risk premiums?, Journal of Futures Markets 15, 637--648.
Dehn J. (2001), The Effects on Growth of Commodity Price Uncertainty and Shocks, World Bank Policy Research Working Paper 2455 (2001).
Engle, R. F. (1982). Autoregressive conditional heteroskedasticity with estimates of the variance of U.K. inflation. Econometrica, 50, 987-1008.
Engle, R.F. and Sheppard, K. 2001. Theoretical and Empirical Properties of Dynamic Conditional Correlation Multivariate GARCH. National Bureau of Economic Research, WP No. 8554.
Ewing, B. and Harter, C. (2000), "Co-movement of Alaska North Slope and UK Brent crude oil prices, Applied Economics Letters, n° 7(8), August 2000, pp.553-558.
E.F. Fama, K.R. French, The capital asset pricing model: theory and evidence, The Journal of Economic Perspectives. 18, 25-46.
Ferderer, P.J. (1996) Oil Price Volatility and the Macroeconomy, Journal of Macroeconomics 18, 1-26.
Fleming, J. Ostdiek, B. (1999) The Impact of Energy Derivatives on the Crude Oil Market, Energy Economics 21, 135 -- 167.
Hamilton, J. D., 1983. Oil and the Macroeconomy since World War II. Journal of Political Economy, 91:228-248.
Hamilton, J. (2003), "What is an Oil Shock?", Journal of Econometrics, April, vol. 113, pp. 363-398
Hamilton, J. (2009), "Understanding Crude Oil Prices", Energy Journal, vol 30, no. 2, pp. 179-206.
Hamilton, J. and Wu, J., C. (2014), "Risk Premia in Crude Oil Futures Prices", Journal of International Money and Finance, 42, April,, 9-37.
Huang, R. D., Masulis, R. W., Stoll, H. R., 1996. Energy shocks and financial markets. Journal of Futures Markets 16, 1-27.
Jawadi, F. and Bellalah, M. (2011), Nonlinear Mean Reversion in Oil Markets, Review of Accounting and Finance, Vol. 10, n°3, pp. 316-326.
Jawadi, F., Arouri, M. and Bellalah, M. (2010), Nonlinear Linkages between Oil and Stock Markets in Developed and Emerging Countries, International Journal of Business, 15(1), 19-31.
Kilian, L. (2008), The Economic Effects of Energy Price Shocks, Journal of Economic Literature, 46, 871-909.
J. Lintner, The valuation of risk assets and the selection of risky investments in stock portfolios and capital budgets, The Review of Economics and Statistics. 47(1965) 13-37.
Manera, M.and Cologni, A. (2009). The Asymmetric Effects of Oil Shocks on Output Growth: A Markov-Switching Analysis for the G-7 Countries, Economic Modelling, 26, 1-29.
Melolinna, M. (2011), "What explains risk premia in crude oil futures?, Working paper No.2, Bank of Finland Research.
Moosa, I. A. and Al-Loughani, N. E.: 1994, Unbiasedness and time varying risk premia in the crude oil futures market, Energy Economics 16, 99--105.
Narayan K P, Narayan S 2010. Modeling the impact of oil prices on Vietnam's stock prices. Applied Energy, 87:356-361
Pindyck R. S. 1999. The Long Run Evolution of Energy Prices. The Energy Journal 20: 1-27.
Plourde, A., and Watkins, G. (1998). Crude oil prices between 1985 and 1994: how volatile in relation to other commodities? Resource and Energy Economics , 245-262.
Sadorsky, P., 1999. Oil Price Shocks and Stock Market Activity. Energy Economics 21, 449-469.
Sadorsky, P. (2006) Modelling and Forecasting Petroleum Futures Volatility Energy Economics 28, 467 -- 488.
Sharpe, W.F (1964), Capital Asset Prices: a Theory of Market Equilibrium under Conditions of Risk, The Journal of Finance. 19, 425-442
Ajmi, N., Elmontasser, G., Hammoudeh, S, and Nguyen, D. (2014), "Oil prices and MENA stock markets: new evidence from nonlinear and asymmetric causalities during and after the crisis period", Applied Economics, Vol. 46, 18.
Alquist, R., Bauer, G., H. and Diez de los Rios A. (2013), "Macroeocnomic Drivers of Crude Oil Futures Risk Premia", Working Paper, Bank of Canada.
Arouri, M. Fouquau, J.(2009) On the short-term influence of oil price changes on stock markets in GCC countries: linear and nonlinear analyses , Economics Bulletin, vol. 29, pp. 806-815.
Bollerslev, T. (1986). Generalized autoregressive conditional heteroskedasticity. Journal of Econometrics, 31, 307-327.
Cappiello, L., Engle, R. F. and Sheppard, K. (2006), "Asymmetric Dynamics in the Correlations of Global Equity and Bond Returns," Journal of Financial Econometrics, vol. 4, No. 4, 537-572
Chevallier, J. and Sévi, B. (2013), "A Fear Index to Predict Oil Futures Returns", Energy Studies Review, 20(3):1-17
Clem A.(1985), Commodity price volatility: trends during 1975-84, Working Paper, Bureau of Labor Statistics.
Deaves, R. and Krinsky, I. ( 1995), Do futures prices for commodities embody risk premiums?, Journal of Futures Markets 15, 637--648.
Dehn J. (2001), The Effects on Growth of Commodity Price Uncertainty and Shocks, World Bank Policy Research Working Paper 2455 (2001).
Engle, R. F. (1982). Autoregressive conditional heteroskedasticity with estimates of the variance of U.K. inflation. Econometrica, 50, 987-1008.
Engle, R.F. and Sheppard, K. 2001. Theoretical and Empirical Properties of Dynamic Conditional Correlation Multivariate GARCH. National Bureau of Economic Research, WP No. 8554.
Ewing, B. and Harter, C. (2000), "Co-movement of Alaska North Slope and UK Brent crude oil prices, Applied Economics Letters, n° 7(8), August 2000, pp.553-558.
E.F. Fama, K.R. French, The capital asset pricing model: theory and evidence, The Journal of Economic Perspectives. 18, 25-46.
Ferderer, P.J. (1996) Oil Price Volatility and the Macroeconomy, Journal of Macroeconomics 18, 1-26.
Fleming, J. Ostdiek, B. (1999) The Impact of Energy Derivatives on the Crude Oil Market, Energy Economics 21, 135 -- 167.
Hamilton, J. D., 1983. Oil and the Macroeconomy since World War II. Journal of Political Economy, 91:228-248.
Hamilton, J. (2003), "What is an Oil Shock?", Journal of Econometrics, April, vol. 113, pp. 363-398
Hamilton, J. (2009), "Understanding Crude Oil Prices", Energy Journal, vol 30, no. 2, pp. 179-206.
Hamilton, J. and Wu, J., C. (2014), "Risk Premia in Crude Oil Futures Prices", Journal of International Money and Finance, 42, April,, 9-37.
Huang, R. D., Masulis, R. W., Stoll, H. R., 1996. Energy shocks and financial markets. Journal of Futures Markets 16, 1-27.
Jawadi, F. and Bellalah, M. (2011), Nonlinear Mean Reversion in Oil Markets, Review of Accounting and Finance, Vol. 10, n°3, pp. 316-326.
Jawadi, F., Arouri, M. and Bellalah, M. (2010), Nonlinear Linkages between Oil and Stock Markets in Developed and Emerging Countries, International Journal of Business, 15(1), 19-31.
Kilian, L. (2008), The Economic Effects of Energy Price Shocks, Journal of Economic Literature, 46, 871-909.
J. Lintner, The valuation of risk assets and the selection of risky investments in stock portfolios and capital budgets, The Review of Economics and Statistics. 47(1965) 13-37.
Manera, M.and Cologni, A. (2009). The Asymmetric Effects of Oil Shocks on Output Growth: A Markov-Switching Analysis for the G-7 Countries, Economic Modelling, 26, 1-29.
Melolinna, M. (2011), "What explains risk premia in crude oil futures?, Working paper No.2, Bank of Finland Research.
Moosa, I. A. and Al-Loughani, N. E.: 1994, Unbiasedness and time varying risk premia in the crude oil futures market, Energy Economics 16, 99--105.
Narayan K P, Narayan S 2010. Modeling the impact of oil prices on Vietnam's stock prices. Applied Energy, 87:356-361
Pindyck R. S. 1999. The Long Run Evolution of Energy Prices. The Energy Journal 20: 1-27.
Plourde, A., and Watkins, G. (1998). Crude oil prices between 1985 and 1994: how volatile in relation to other commodities? Resource and Energy Economics , 245-262.
Sadorsky, P., 1999. Oil Price Shocks and Stock Market Activity. Energy Economics 21, 449-469.
Sadorsky, P. (2006) Modelling and Forecasting Petroleum Futures Volatility Energy Economics 28, 467 -- 488.
Sharpe, W.F (1964), Capital Asset Prices: a Theory of Market Equilibrium under Conditions of Risk, The Journal of Finance. 19, 425-442
Téléchargements
Publié-e
2015-11-19
Numéro
Rubrique
Articles
Licence
Rights for Authors
As further described in our submission agreement (the Submission Agreement), in consideration for publication of the article, the authors assign to Energy Studies Review all copyright in the article, subject to the expansive personal--use exceptions described below.
Attribution and Usage Policies
Reproduction, posting, transmission or other distribution or use of the article or any material therein, in any medium as permitted by a personal-use exemption or by written agreement of Energy Studies Review, requires credit to Energy Studies Review as copyright holder (e.g., Energy Studies Review © 2014).
Personal-use Exceptions
The following uses are always permitted to the author(s) and do not require further permission from DigitalCommons@McMaster provided the author does not alter the format or content of the articles, including the copyright notification:
- Storage and back-up of the article on the author's computer(s) and digital media (e.g., diskettes, back-up servers, Zip disks, etc.), provided that the article stored on these computers and media is not readily accessible by persons other than the author(s);
- Posting of the article on the author(s) personal website, provided that the website is non-commercial;
- Posting of the article on the internet as part of a non-commercial open access institutional repository or other non-commercial open access publication site affiliated with the author(s)'s place of employment (e.g., a Phrenology professor at the University of Southern North Dakota can have her article appear in the University of Southern North Dakota's Department of Phrenology online publication series); and
- Posting of the article on a non-commercial course website for a course being taught by the author at the university or college employing the author.
People seeking an exception, or who have questions about use, should contact the editors.
