Affiliation:
1. School of Accounting, Economics & Finance University of Portsmouth Portsmouth UK
2. Department of Economics University of Patras Rio Greece
3. Department of Accounting and Finance University of Sussex Brighton UK
Abstract
AbstractWe investigate the robust determinants of the West Texas Intermediate/Brent oil price differential by employing a time‐varying framework. To achieve this, a dynamic model averaging framework is used, considering monthly data over the period 1994:1–2021:3. Our results suggest that the convenience yield, the global economic activity index, and the government bond yields act as the main factors that exercise a persistent and significant impact, for the largest part of the study period, although at different magnitude. More importantly, though, we show that at different time periods there are additional factors that exercise a significant impact on the oil price differential, such as refining constraints, stock market volatility, trading volume, and geopolitical risk. Thus, unless a dynamic modeling framework is employed, the full spectrum of the related effects cannot be revealed. A series of tests confirm the robustness of our findings. Several policy implications of these results are also discussed.
Subject
Economics and Econometrics,Finance,General Business, Management and Accounting,Accounting