Measuring the Interaction between Uncertainty and Crude Oil Market: A Multiscale Methodology Based on Synthetic Integration

Abstract

Abstract: As a typical complex system, the energy system is highly susceptible to a variety of uncertainty factors from the external environment during its development. Based on the thought of complex systems management, this paper incorporates different levels of uncertainty, including economic policy uncertainty, market panic and geopolitical risk into the same framework according to the financial attributes, commodity attributes and political attributes of crude oil. And a multi-scale complex system research methodology based on meta-synthesis is constructed to study the influence rule and mechanism of the complex system formed by uncertainties and crude oil market at different time, frequency and price levels. In this paper, six uncertainty indicators and crude oil futures price for a total of 270 months from 1997 to 2019 are selected. With the help of wavelet analysis and quantile regression method, the study finds that the interaction between uncertainties and the crude oil market varies between different indicators, time-frequency scales and different price levels. This helps understand the complex interaction mechanism between the crude oil market and the uncertainty system, and has important reference value for the reasonable decision-making of stakeholders.

Key words: uncertainty, oil price, multi-scale, wavelet analysis, quantile regression

Feng Yuyao, Liu Chang, Sun Xiaolei. Measuring the Interaction between Uncertainty and Crude Oil Market: A Multiscale Methodology Based on Synthetic Integration[J]. Management Review, 2020, 32(7): 29-40.

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