Downside uncertainty shocks in the oil and gold markets

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We construct downside variance risk premiums from the crude oil and gold option data and use them as proxies for market downside uncertainty risks. We find that these downside variance risk premiums contain commodity market-specific pricing information. Furthermore, the gold market's exposure to downside uncertainty shocks is cross-sectionally priced in the stock market while its crude oil market counterpart is not. This implies that the downside uncertainty for the gold market may be a key state variable representing investment opportunity sets under the Intertemporal Capital Asset Pricing Model (ICAPM).
Publisher
ELSEVIER
Issue Date
2020-03
Language
English
Article Type
Article
Citation

INTERNATIONAL REVIEW OF ECONOMICS & FINANCE, v.66, pp.291 - 307

ISSN
1059-0560
DOI
10.1016/j.iref.2019.12.003
URI
http://hdl.handle.net/10203/272353
Appears in Collection
MT-Journal Papers(저널논문)
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