Navigating Economic Swings: Asymmetric Effects of Crude Oil Volatality

Abstract

The Oil Price Volatility Index (OPVI) is the best indication of how unpredictable oil prices are. In this research, we concentrate on the volatility index for oil prices to assess the effect of crude oil price volatility on aggregate and market returns across a variety of economic sectors. Since quantile regression modeling (QRM) enables a more complete examination across various market circumstances, it is utilized to pinpoint the issue and research topic. Meanwhile, the asymmetric effects of ambiguous shockwaves are examined using the positive (+) and negative (-) variations of the crude oil price volatility index (OPVI). Although this reform was the most significant step in reducing government control of India's domestic crude oil pricing, the study also examines whether or not the 2012 change enhanced the OPVI stock link. The findings of this paper demonstrate that changes in the OPVI are consistent with the significant negative effects of falling oil prices on overall and individual economic sector stock returns. For these effects to occur, positive shockwaves in the crude oil price volatility index are more crucial than negative shockwaves. Additionally, following the 2012 reform, the positive shocks to the crude oil price volatility index had less of an impact on the returns on Indian stocks. The crude price oil volatility index is a valuable instrument for anticipating market volatility and enhancing investment outcomes, according to the study's conclusions.