Gauging Returns and Volatility of Crude Oil using GARCH Approach
DOI:
https://doi.org/10.22555/ijelcs.v9i1.1155Keywords:
Brent, WTI, Crude oil, price returns, Volatility, GARCH modelAbstract
This paper uses two distinct types of crude oil to measure the returns and volatility of crude oil: Brent and West Texas Intermediate (WTI). The time series data of two crude oil prices per barrel, collected from the international market, calculates the volatility and returns. The data spans from February 1, 2014, to February 1, 2024. 2537 observations are considered for WTI, and 2542 observations are taken for Brent in this paper. This study uses the E-view model to analyse the secondary data and look up the ARCH and GARCH impacts at a significance level. The mean reversion of WTI is 0.993582, and Brent crude mean reversion is 0.956194. The results show that WTI has a slower mean reversion than Brent because it is closer to 1. Further half-life model analysis showed that WTI reverted to its mean position after 99 days and Brent after 16 days. This study concludes that WTI is more volatile than Brent crude oil.
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