The Causal Relationship between the VIX and Global Oil Prices under Geopolitical Tensions: An Econometric Study using Toda-Yamamoto Methodology
DOI:
https://doi.org/10.37375/esj.v9i2.4389Abstract
This study aims to measure the causal relationship between global oil prices and the VIX fear index under geopolitical tensions, for the period from 2-March to 3-June, 2026, using the Toda-Yamamoto methodology. The study concluded that there is a unidirectional causal relationship from the VIX to global oil prices under geopolitical tensions. Therefore, the study recommends that, in addition to continuously monitoring the positive or negative effects of major international political and economic events on oil prices, investors in crude oil markets should use fear indices to predict oil price movements and then implement long-buy or short-sell strategies to hedge against price risks.
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