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Oil vs. gasoline: The dark side of volatility and taxation

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  • Aboura, Sofiane
  • Chevallier, Julien

Abstract

This paper investigates the relation between gasoline volatility and crude oil volatility. The objective is to examine whether the so-called asymmetric relation between gasoline and oil prices still holds for volatility, particularly, when considering the taxation effect. The approach hinges on the Volatility Threshold Dynamic Conditional Correlation (VT DCC) model. An application to the U.S. WTI oil volatility and the U.S. premium gasoline volatility is provided from 1990 to 2015. The main results reveal that oil volatility influences gasoline volatility, but without any form of asymmetry. The role of taxation seems to particularly affect the volatility of volatility for gasoline.

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  • Aboura, Sofiane & Chevallier, Julien, 2017. "Oil vs. gasoline: The dark side of volatility and taxation," Research in International Business and Finance, Elsevier, vol. 39(PB), pages 976-989.
    • Handle: RePEc:eee:riibaf:v:39:y:2017:i:pb:p:976-989
    DOI: 10.1016/j.ribaf.2016.02.005
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    More about this item

    Keywords

    Volatility; Gasoline; Crude oil; Asymmetry; VT DCC; Taxation;
    All these keywords.

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • G1 - Financial Economics - - General Financial Markets
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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