Asymmetry and Uncertainty Across Energy and FX Markets

33 Pages Posted: 11 Nov 2014

See all articles by Ahmed A.A. Khalifa

Ahmed A.A. Khalifa

King Fahd University of Petroleum & Minerals (KFUPM)

Massimiliano Caporin

University of Padova - Department of Statistical Sciences

Shawkat M. Hammoudeh

Montpellier Business School; Drexel University - Lebow College of Business

Date Written: November 11, 2014

Abstract

Employing a time-varying volatility transmission model, this study examines the impact of asymmetric information and uncertainty on the interactions across energy and foreign exchange markets. The results show that the ARCH coefficients monitoring the impact for the "own" shocks (currency on currency and energy on energy) are in almost all cases statistically significant and positive as expected, for the models with Natural Gas and with WTI Oil, irrespectively of the currency considered. There is strong evidence of asymmetry when focusing on the Oil-based models; in the meantime, the asymmetry has a lower impact for Natural Gas. Concerning the uncertainty-related variables, there is much stronger evidence of significant impacts on volatility, as opposed to what observed in the mean dynamic. For WTI Oil, almost all uncertainty measures lead to an increase in the conditional variance (this holds true for both changes and levels). Significant coefficients are commonly found also for currencies independently of the presence of energy commodities in the bivariate model. Finally, for natural gas, the striking result is related to the limited relevance of uncertainty measures, showing very few cases of significant coefficients.

Keywords: Asymmetry, Interdependence, Uncertainty, Business cycle, Energy, FX

JEL Classification: G11, G15, C51, C52, C22, C32

Suggested Citation

Khalifa, Ahmed A.A. and Caporin, Massimiliano and Hammoudeh, Shawkat M., Asymmetry and Uncertainty Across Energy and FX Markets (November 11, 2014). Available at SSRN: https://ssrn.com/abstract=2522792 or http://dx.doi.org/10.2139/ssrn.2522792

Ahmed A.A. Khalifa

King Fahd University of Petroleum & Minerals (KFUPM) ( email )

Dhahran, 31261
Saudi Arabia
+96638607082 (Phone)
+96638602585 (Fax)

Massimiliano Caporin (Contact Author)

University of Padova - Department of Statistical Sciences ( email )

Via Battisti, 241
Padova, 35121
Italy

Shawkat M. Hammoudeh

Montpellier Business School ( email )

2300 Avenue des Moulins
Montpellier, 34080
France

Drexel University - Lebow College of Business ( email )

3141 Chestnut Street
Philadelphia, PA 19104
United States
2158956673 (Phone)
2158956975 (Fax)

HOME PAGE: http://faculty.lebow.drexel.edu/HammoudehS/

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
40
Abstract Views
500
PlumX Metrics