Data for: Equity market implied volatility and energy prices: A double threshold GARCH approach

Published: 30 November 2016| Version 1 | DOI: 10.17632/77ck4vstfb.1
Iqbal Mansur


Abstract of associated article: This study investigates the role of VIX in determining the returns and return volatilities of oil, heating oil, gasoline, and natural gas. A double threshold GARCH(1,1) methodology is utilized where the VIX index is used as the threshold regime change indicator. Daily data from January 4, 1999, to December 31, 2013, are used. A sub-period analysis covering only the financial crisis period of January 2, 2007, to December 31, 2009, is also performed. This study provides evidence that the level of equity market volatility (i.e., VIX) that triggers a regime shift is commodity specific. The results also indicate that the threshold VIX values are time varying. Furthermore, natural gas prices appear to withstand considerably more volatility in the equity market than do the prices of other energy commodities. This relationship is even more pronounced during the financial crisis period. Approximately 70% and 50% of the estimated coefficients display asymmetric sensitivities due to regime changes during the entire period and the crisis period, respectively. The findings have practical implications as the underlying volatility of an asset plays a significant role in determining its associated activity in the futures markets.



Economics, Macroeconomics