This paper uses a nonparametric quantile-based methodology to analyse the predictive ability of OPEC meeting dates and production announcements on (Brent Crude and West Texas Intermediate) oil a measure of futures market volatility that is robust to jumps. We found a nonlinear relationship between oil futures volatility and OPEC-based predictors; hence, linear Granger-causality tests are misspecified and the linear model results of nonpredictability are unreliable. Results of the quantile-causality test show that OPEC variables’ impact on oil futures markets is restricted to Brent Crude futures, with no effect observed for the WTI market. Specifically, OPEC production announcements and meeting dates predict only lower quantiles of the conditional distribution of Brent futures market volatility – a much weaker result compared to when volatility models used in the literature are not robust to jump and outliers.
|Number of pages||22|
|Journal||Advances in Decision Sciences|
|Early online date||28 Oct 2019|
|Publication status||Published - 1 Dec 2019|
Gupta, R., Lau, C. K., & Yoon, S-M. (2019). OPEC News Announcement Effect on Volatility in the Crude Oil Market: A Reconsideration. Advances in Decision Sciences, 23(4), 1-22. http://iads.site/wp-content/uploads/papers/2019/OPEC-News-Announcement-Effect-on-Volatility-in-the-Crude-Oil-Market-A-Reconsideration.pdf