Jstock military3/27/2023 In the midst of the global challenge of climate change induced by the consumption of fossil fuels, energy security remains a global concern. The findings have important implications for importers and investors. When US EPU peak occurs, crude oil importers can formulate a basket price strategies with dynamic weighted based on the median-CoVaR model, which can better reduce the depreciation risk of crude oil assets. Compared with the median-VaR portfolio strategy and the equal-weight combination portfolio strategy, the advantage of the median-CoVaR model is that it can achieve ‘targeted’ management for asset risk under specific conditions. When US EPU increases from the average level to the 0.95 quantile level, the price reduction risk of crude oil market in Brent, Dubai and Western Texas increases by 37.26%, 42.66%, and 39.28% respectively, and the price increase risk increases by 7.22%, 6.64%, and 7.53% respectively. Results show that the spillover effect of US EPU on international crude oil market risk is nonlinear, asymmetric and time-varying. GARCH-tDDC-Copula model is constructed to study the spillover effect of US EPU on the international crude oil market risk, and then the median-CoVaR portfolio model is constructed to discuss the optimal portfolio strategy of crude oil importers when US EPU is in different states. The paper investigates the impact of US economic policy uncertainty (EPU) on major crude oil markets. However, we do not observe significant differences before and after the conflict and geopolitical events. The empirical results provide evidence of persistence and breaks in the oil prices series and stationary long memory in the absolute returns. For this purpose we use techniques based on unit roots and fractional integration. Then, we also address the following issue: Does the crude oil price behave in the same way before and after a military conflict or geopolitical problem in the producer countries? To answer this question we analyse the real oil prices of West Texas Intermediate (WTI) before and after the different military conflicts and political events that occurred after World War II. In the paper we first investigate the statistical properties of the real oil prices as well as its log-transformation, along with the absolute and squared returns values. We understand that these causes could be geopolitical issues and/or military conflicts in/with the producer countries and a problem relating to demand and supply. Crude oil price behaviour depends on all the events that have the potential to disrupt the flow of oil.
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