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On the Oil Price Uncertainty

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  • Zied Ftiti
  • Fredj Jawadi

Abstract

This study focuses on oil price volatility and uncertainty over the period January 1986-December 2018, covering episodes of oil price increases and collapses. Accordingly, in line with Poon and Granger (2003), and Teräsvirta and Zhao (2011), we propose three different specifications of stochastic oil volatility: standard stochastic volatility, stochastic volatility moving average, leverage stochastic volatility models. We compute the out-of-sample forecasts for the uncertainty in oil prices using the estimates for these three stochastic oil price volatility models and we discuss its effects. Our findings show that the standard stochastic volatility model outperforms the other two models when focusing on oil price uncertainty. This finding is relevant to better forecast and understand the effects of oil price uncertainty on the real economy.

Suggested Citation

  • Zied Ftiti & Fredj Jawadi, 2019. "On the Oil Price Uncertainty," The Energy Journal, , vol. 40(2_suppl), pages 19-40, December.
    • Handle: RePEc:sae:enejou:v:40:y:2019:i:2_suppl:p:19-40
    DOI: 10.5547/01956574.40.SI2.zfti
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    References listed on IDEAS

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    1. Bashar, Omar H.M.N. & Wadud, I.K.M. Mokhtarul & Ali Ahmed, Huson Joher, 2013. "Oil price uncertainty, monetary policy and the macroeconomy: The Canadian perspective," Economic Modelling, Elsevier, vol. 35(C), pages 249-259.
    2. Sadorsky, Perry, 2008. "Assessing the impact of oil prices on firms of different sizes: Its tough being in the middle," Energy Policy, Elsevier, vol. 36(10), pages 3854-3861, October.
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    Cited by:

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    2. Katsafados, Apostolos G. & Leledakis, George N. & Panagiotou, Nikolaos P. & Pyrgiotakis, Emmanouil G., 2024. "Can central bankers’ talk predict bank stock returns? A machine learning approach," MPRA Paper 122899, University Library of Munich, Germany.
    3. Ciniro A. L. Nametala & Jonas Villela de Souza & Alexandre Pimenta & Eduardo Gontijo Carrano, 2023. "Use of Econometric Predictors and Artificial Neural Networks for the Construction of Stock Market Investment Bots," Computational Economics, Springer;Society for Computational Economics, vol. 61(2), pages 743-773, February.

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    More about this item

    Keywords

    Oil volatility; Oil price uncertainty; Stochastic volatility models; Forecasting.;
    All these keywords.

    JEL classification:

    • F0 - International Economics - - General

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