Erik Haugom, Rina Ray
Journal of Commodity Markets,Vol. 5, Pages: 36-49.
We are the first to analyze the relation between liquidity, volatility, and return distributions for the crude oil futures market. We do this by using a quantile regression method while most of the research in the field of liquidity and volatility has employed conventional OLS regression. While the latter approach can be useful in many applications, it fails to provide any insight about the effects in the rest of the distributions-outside the mean-of interest. Our results show that a distinct volatility “smile” is formed when trading activity, …