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Journal Articles Energy Studies Review Year : 2014

A fear index to predict oil futures returns

Julien Chevallier
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This paper evaluates the predictability of WTI light sweet crude oil futures by using the variance risk premium, i.e. the difference between model-free measures of implied and realized volatilities. Additional regressors known for their ability to explain crude oil futures prices are also considered, capturing macroeconomic, financial and oil-specific influences. The results indicate that the explanatory power of the (negative) variance risk premium on oil excess returns is particularly strong (up to 25% for the adjusted R-squared across our regressions). It complements other financial (e.g. default spread) and oil-specific (e.g. US oil stocks) factors highlighted in previous literature.


Dates and versions

hal-01463111 , version 1 (09-02-2017)



Julien Chevallier, Benoît Sévi. A fear index to predict oil futures returns. Energy Studies Review, 2014, 20 (3), pp.1--17. ⟨10.15173/esr.v20i3.552⟩. ⟨hal-01463111⟩
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