Publication date: Available online 23 November 2019
Source: Finance Research Letters
Author(s): Mohamed A. Ayadi, Walid Ben Omrane, Skander Lazrak, Xusheng Yan
Abstract
We examine the simultaneous effect of OPEC production decisions and press releases, oil and gasoline inventory surprises, as well as US and Canadian macroeconomic news announcements on oil and Canadian dollar volatilities around US and European financial crises. We use a multivariate volatility model and implement an impulse response analysis to decompose the exogenous impacts into direct and indirect effects induced by volatility spillover. We find evidence of context-specific impacts and show that 67% of the total accumulated effect of OPEC decision to maintain production on oil volatility is induced by volatility spillover from the Canadian foreign exchange rate.