Tuesday, February 23, 2016

"Effects of Inventory Announcements on Crude Oil Price Volatility"

Ahead of today's API numbers and tomorrow's EIA report:
From the Social Science Research Network:

Effects of Inventory Announcement on Crude Oil Price Volatility

Hui Bu

School of Economics and Management, Beihang University

May 11, 2015

Energy Economics, Vol. 46, 2014

This paper examines the behavior of crude oil futures price volatility and investigates how the EIA weekly crude oil inventory reports announcements, especially information shocks, impact crude oil price movement and volatility. This study focuses on inventory information shocks using a new measure rather than on inventory changes themselves. The empirical results reveal that inventory information shocks rather than actual inventory changes negatively affect crude oil returns on the day the EIA releases the inventory information, although inventory shocks have no effect on daily conditional variance, which mainly follows a GARCH(1,1) process. To test the robustness of our model, we re-estimate the models for three subsamples. According to all results, we find that the effect of inventory shocks is weakened in rapid growth periods and disappears in steep fall markets.

Number of Pages in PDF File: 10
SSRN download page.