Sources of Volatility During Four Oil Price Crashes
10 Pages Posted: 21 Apr 2015
Date Written: April 20, 2015
Previous sharp oil price declines have been accompanied by elevated ex-post volatility. In contrast, volatility was much less elevated during the oil price crash in 2014/15. We provide evidence that oil prices declined in a relatively measured manner during 2014/15, with the dispersion of price changes that was considerably smaller than comparable oil price declines. This finding is robust to using both descriptive and GARCH measures of volatility. Further, the U.S. dollar appreciation exerted a strong influence on volatility during the recent crash; in contrast, the impact of equity market shocks was muted.
Keywords: Crude oil price, volatility, oil price crashes, commodity markets
JEL Classification: Q43, Q47, E39
Suggested Citation: Suggested Citation