The yield on the 10-year U.S.Treasury Note is among the most cited interest rates by investors,policymakers,and financial institutions.We show that the 10-year Treasury yield’s forward-looking volatility,a VIX-style ...The yield on the 10-year U.S.Treasury Note is among the most cited interest rates by investors,policymakers,and financial institutions.We show that the 10-year Treasury yield’s forward-looking volatility,a VIX-style measure that is a proxy for uncertainty about future interest rates,is a useful state variable capable of predicting the returns and volatility of crude oil prices over the near term.Using monthly data from 2003 to 2020,we document that higher implied volatility in the 10-year U.S.Treasury derivatives market predicts declining oil prices and higher forward-looking volatility in those prices.Our results are robust to different subsamples and various empirical designs.展开更多
Recent theoretical developments in economics distinguish between risk and ambiguity(Knightian uncertainty).Using state-of-the-art methods with intraday stock market data from February 1993 to February 2021,we derive f...Recent theoretical developments in economics distinguish between risk and ambiguity(Knightian uncertainty).Using state-of-the-art methods with intraday stock market data from February 1993 to February 2021,we derive financial ambiguity and empirically examine the effect of shocks to it on the price and volatility of crude oil.We provide evidence that ambiguity carries important information about future oil returns and volatility perceived by investors.We validate these results using Granger causality and in-sample and out-of-sample forecasting tests.Our findings reveal that financial ambiguity is a possible factor that explains future drops in oil prices and their increased variability.Our findings will benefit scholars and investors interested in how financial ambiguity shapes short-term oil prices.展开更多
文摘The yield on the 10-year U.S.Treasury Note is among the most cited interest rates by investors,policymakers,and financial institutions.We show that the 10-year Treasury yield’s forward-looking volatility,a VIX-style measure that is a proxy for uncertainty about future interest rates,is a useful state variable capable of predicting the returns and volatility of crude oil prices over the near term.Using monthly data from 2003 to 2020,we document that higher implied volatility in the 10-year U.S.Treasury derivatives market predicts declining oil prices and higher forward-looking volatility in those prices.Our results are robust to different subsamples and various empirical designs.
文摘Recent theoretical developments in economics distinguish between risk and ambiguity(Knightian uncertainty).Using state-of-the-art methods with intraday stock market data from February 1993 to February 2021,we derive financial ambiguity and empirically examine the effect of shocks to it on the price and volatility of crude oil.We provide evidence that ambiguity carries important information about future oil returns and volatility perceived by investors.We validate these results using Granger causality and in-sample and out-of-sample forecasting tests.Our findings reveal that financial ambiguity is a possible factor that explains future drops in oil prices and their increased variability.Our findings will benefit scholars and investors interested in how financial ambiguity shapes short-term oil prices.
