Energy sector uncertainty decomposition: New approach based on implied volatilities

The COVID-19 storm and the energy sector: The impact and role of uncertainty

“…Panel A of Table 4 shows that Δ CV 19 I t has a statistically significant and negative effect on global energy sector returns with a β i ,∆ CV 19 I of −0.0028, and on all national energy sectors. These results are consistent with the nascent literature on the negative impact of COVID-19 uncertainty on market aggregates ( Costola et al, 2020 ; Liu et al, 2020 ; Smales, 2021 amongst others) and mirror prior studies on the sensitivity of this sector to uncertainty ( Bianconi and Yoshino, 2014 ; Fazelabdolabadi, 2019 ; Nikkinen and Rothovius, 2019 ).…”

“…These results are consistent with a broader body of literature which finds that uncertainty negatively impacts asset prices and is crucial to investment decisions ( Anderson et al, 2009 ; Bams et al, 2017 ; Naeem et al, 2020 ). Nikkinen and Rothovius (2019) disaggregated the sources of uncertainty faced by companies in the energy sector and showed that this can be attributed to uncertainty around crude oil prices and stock markets, as measured by implied volatility indices. In addition, uncertainty as measured by increases in searches related to crude oil, results in an increase in the weight of the crude oil uncertainty component.…”

The COVID-19 Storm and the Energy Sector: The Impact and Role of Uncertainty

“…Panel A of Table 4 shows that Δ𝐶𝑉19𝐼 𝑡 has a statistically significant and negative effect on global energy sector returns with a 𝛽 𝑖,∆𝐶𝑉19𝐼 of -0.0028, and on all national energy sectors. These results are consistent with the nascent literature on the negative impact of COVID-19 uncertainty on market aggregates (Costola et al, 2020;Liu et al, 2020;Smales, 2021 among others) and mirror prior studies on the sensitivity of this sector to uncertainty (Bianconi & Yoshino, 2014;Fazelabdolabadi, 2019;Nikkinen & Rothovius, 2019).…”

“…These results are consistent with a broader body of literature that finds uncertainty negatively impacts asset prices and is crucial to investment decisions (Anderson et al, 2009;Bams et al, 2017;Naeem et al, 2020). Nikkinen and Rothovius (2019) disaggregated the sources of uncertainty faced by companies in the energy sector and showed that this can be attributed to uncertainty around crude oil prices and stock markets, as measured by implied volatility indices. In addition, uncertainty, as measured by increases in searches related to crude oil, results in an increase in the weight of the crude oil uncertainty component.…”

Uncertainties and green bond markets: Evidence from tail dependence

“…Additionally, oil market uncertainty is always revealed as an important source of uncertainty for fossil fuel‐related assets, such as energy futures (Gong & Lin, 2018; Nikkinen & Rothovius, 2019) and clean energy stocks (Ahmad et al, 2018; Dutta, 2017). OVX appears to be a superior indicator to measure this uncertainty and is widely utilised in the previous literature, whose financial influence also displays an asymmetric format similar to other uncertainties (Kocaarslan et al, 2017; Xiao et al, 2018).…”