Exploring the dynamic relationship between crude oil price and implied volatility indices: A MF-DCCA approach

摘要

This paper investigates the cross-correlation between crude oil prices and implied volatility indices - the investor's fear gauges, using a cross-correlation statistical test and multifractal detrended cross-correlation analysis (MF-DCCA). The results show that the cross-correlations between crude oil prices and three different implied volatility indices are multifractal. By finding the "crossover", we separate the three pairs of series into the short- and long-term, respectively, and find that the cross-correlations are strongly anti-persistent in both short- and long-term. Moreover, cross-correlations of small and large fluctuations are anti-persistent in the short- and long-term, suggesting that crude oil prices and implied volatility indices are susceptible to each other. We also find that the cross-correlation exponents are less than the average generalized Hurst exponent when q<0 and more than the average generalized Hurst exponent when q>0 in the short-term and that the opposite results are true in the long-term. (C) 2019 Elsevier B.V. All rights reserved.