Oil Price Volatility, Global Financial Crisis and The Month-of-the-Year Effect

Abstract

This paper investigates the month-of-the-year effect in the UK Brent crude oil market using the GARCH (1,5) and GJR-GARCH (1,5) models in the light of Asian financial crisis and the global financial crisis using daily data over the period, January 4, 1988 and May 27, 2009. The result shows the presence of the month-of-the-year effect in volatility but not in the return in the oil market. However, the pattern of significance of monthly effect in volatility is affected by the choice of model. The significant month-of-the-year effect on volatility may be in line with information availability theoryThe result shows that the Asian financial crisis has an impact on the oil price return series while the global financial crisis has no impact on oil price returns. The Asian financial crisis and global financial crisis did not account for the sudden change in variance.

Examining the day-of-the-week-effect and the-month-of-the-year-effect in cryptocurrency market

“…He concluded that there was a month-of-the-year effect on the capital markets in Indonesia, Malaysia, Thailand, and the Philippines and the gold, silver, platinum and palladium products also had seasonal patterns. While a study by Olowe (2010) which examined the commodity market found that there was a month-of-the-year effect on the Brent North Sea crude oil product in a certain period. Swami (2012) examined the day-tothe-week effect in five countries in South Asia (India, Sri Lanka, Pakistan, Bangladesh, and Nepal) and found that there was a day-to-the-week effect in Sri Lanka and Bangladesh.…”

“…The month-of-the-year effect occurs if the return in a certain period is significantly different from other months, both higher and lower. The usual pattern includes the after-new-year effect (in the first month) where the return is usually higher than the following month because investors rearrange their portfolio positions and purchase shares at the beginning of the year (Olowe, 2010;Swami, 2012;Robiyanto, 2017). Based on previous researches examining the month-of-the-year-effect on the commodity market and the stock market, the first hypothesis that can be proposed is: H 1 : there is a month-of-the-year-effect on the cryptocurrency market…”