{"title":"Conditional threshold effects of stock market volatility on crude oil market volatility","authors":"Kaiji Motegi, Shigeyuki Hamori","doi":"10.1016/j.eneco.2025.108189","DOIUrl":null,"url":null,"abstract":"In this paper, we analyze conditional threshold effects of stock market volatility on crude oil market volatility. We use Conditional Threshold Autoregression (CoTAR), a novel extension of TAR from a constant threshold to a time-varying threshold. The conditional threshold is specified as an empirical quantile of recent realizations of a threshold variable. This specification is expected to match investors’ relative perception of financial risk. The target variable is monthly realized volatility (RV) measures of the West Texas Intermediate, and the threshold variable is monthly RV measures of the S&P 500 Index. Our rolling window out-of-sample analysis indicates that the predictive ability of CoTAR is at least on par with TAR for all cases considered, and significantly better than TAR for some cases. The superiority of CoTAR is pronounced when the target variable is a downside RV measure. This is a useful finding which helps market participants and policymakers better control downward risks.","PeriodicalId":11665,"journal":{"name":"Energy Economics","volume":"6 1","pages":""},"PeriodicalIF":13.6000,"publicationDate":"2025-01-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Energy Economics","FirstCategoryId":"96","ListUrlMain":"https://doi.org/10.1016/j.eneco.2025.108189","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 0
Abstract
In this paper, we analyze conditional threshold effects of stock market volatility on crude oil market volatility. We use Conditional Threshold Autoregression (CoTAR), a novel extension of TAR from a constant threshold to a time-varying threshold. The conditional threshold is specified as an empirical quantile of recent realizations of a threshold variable. This specification is expected to match investors’ relative perception of financial risk. The target variable is monthly realized volatility (RV) measures of the West Texas Intermediate, and the threshold variable is monthly RV measures of the S&P 500 Index. Our rolling window out-of-sample analysis indicates that the predictive ability of CoTAR is at least on par with TAR for all cases considered, and significantly better than TAR for some cases. The superiority of CoTAR is pronounced when the target variable is a downside RV measure. This is a useful finding which helps market participants and policymakers better control downward risks.
期刊介绍：
Energy Economics is a field journal that focuses on energy economics and energy finance. It covers various themes including the exploitation, conversion, and use of energy, markets for energy commodities and derivatives, regulation and taxation, forecasting, environment and climate, international trade, development, and monetary policy. The journal welcomes contributions that utilize diverse methods such as experiments, surveys, econometrics, decomposition, simulation models, equilibrium models, optimization models, and analytical models. It publishes a combination of papers employing different methods to explore a wide range of topics. The journal's replication policy encourages the submission of replication studies, wherein researchers reproduce and extend the key results of original studies while explaining any differences. Energy Economics is indexed and abstracted in several databases including Environmental Abstracts, Fuel and Energy Abstracts, Social Sciences Citation Index, GEOBASE, Social & Behavioral Sciences, Journal of Economic Literature, INSPEC, and more.
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