Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/271221 
Authors: 
Year of Publication: 
2018
Series/Report no.: 
QMS Research Paper No. 2018/05
Publisher: 
Queen's University Belfast, Queen's Management School, Belfast
Abstract: 
This article examines the interconnectedness of WTI and Brent prices on different resolutions of price movements. Firstly, within a multivariate BEKK framework we identify high but volatile correlations with recurring highs around 0.8 and multiple periods of decoupling. OPEC meetings increase the correlation in the short run. Secondly, linear l1-trends reveal that long-term movements of WTI and Brent are driven by the same dynamics, confirming the `one great pool' hypothesis. OPEC meetings have only little impact on long-term price trends. Thirdly, we find leading effects of WTI over Brent by short-term trends of several days, especially in a negative direction. These trends have an asymmetrical effect on volatility; negative trends cause a stronger increase than positive trends. These findings are of interest to policy makers as well as hedging strategies of crude oil portfolios and provide insight into long-term movements of crude prices.
Subjects: 
Correlation
l1-trends
Leading Effects
OPEC
Volatility Spillover
JEL: 
C54
O13
Q43
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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