Demirer, RizaGupta, RanganSuleman, TahirWohar, Mark E.2018-09-182018-09Demirer, R., Gupta, R., Suleman, T. et al. 2018, 'Time-varying rare disaster risks, oil returns and volatility', Energy Economics, vol. 75, pp. 239-248.0140-9883 (print)1873-6181 (online)10.1016/j.eneco.2018.08.021http://hdl.handle.net/2263/66587This paper provides a novel perspective to the predictive ability of rare disaster risks for West Texas Intermediate (WTI) oil market returns and volatility using a nonparametric quantile-based methodology over the monthly period of 1918:01–2013:12. We show that a nonlinear relationship and structural breaks exists between oil returns and various rare disaster risks; hence, linear Granger causality tests are misspecified and the linear model results of non-predictability are unreliable. However, the quantile-causality test shows that rare disaster-risks strongly affect both WTI returns and volatility, with stronger evidence of predictability observed at lower quantiles of the respective conditional distributions. Our results are robust to alternative specification of volatility (based on a GARCH model), and measure of rare disaster risks (based on the number of crises).en© 2018 Elsevier B.V. All rights reserved. Notice : this is the author’s version of a work that was accepted for publication in Energy Economics. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. A definitive version was subsequently published in Energy Economics, vol. 75, pp. 239-248, 2018. doi : 10.1016/j.eneco.2018.08.021.Oil returnsVolatilityRare disastersNonparametric quantile causalityDisastersWest Texas intermediate (WTI)Predictive abilitiesNon-predictabilityNon-linear relationshipsGranger causality testConditional distributionRisk assessmentCrude oilPostprint Article