Oil vs. gasoline: The dark side of volatility and taxation |
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| Institution: | 1. Université de Paris XIII, Sorbonne Paris Cité, CEPN (UMR CNRS 7234), 99 avenue Jean-baptiste Clément, 93430 Villetaneuse, France;2. IPAG Business School (IPAG Lab), 184 boulevard Saint Germain, 75006 Paris, France;3. Université Paris 8 (LED), 2 avenue de la Liberté, 93526 Saint Denis, France;1. Department of Business and Economics, Ursinus College, 601 East Main Street, Collegeville, PA 19426, United States;2. Department of Economics, Fordham University, 113 West 60th Street, NY, NY 10023, United States;1. University of Ottawa, Canada;2. Royal Military College of Canada, Canada;3. Carleton University, Canada;1. Department of Economics, University of Calgary, Calgary, Alberta T2N 1N4, Canada;2. Department of Economics and Finance, University of South Alabama, Mobile, AL 36688, United States |
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| Abstract: | This paper investigates the relation between gasoline volatility and crude oil volatility. The objective is to examine whether the so-called asymmetric relation between gasoline and oil prices still holds for volatility, particularly, when considering the taxation effect. The approach hinges on the Volatility Threshold Dynamic Conditional Correlation (VT DCC) model. An application to the U.S. WTI oil volatility and the U.S. premium gasoline volatility is provided from 1990 to 2015. The main results reveal that oil volatility influences gasoline volatility, but without any form of asymmetry. The role of taxation seems to particularly affect the volatility of volatility for gasoline. |
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| Keywords: | Volatility Gasoline Crude oil Asymmetry VT DCC Taxation |
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