Time-varying risk aversion and ‘investor fear’: Evidence from the crude oil markets

Analysis of time-varying risk aversion and its relationship with investor fear in the crude oil markets, remains under-explored in the literature. This paper examines such issues where we find that risk aversion towards oil markets exhibits a counter-cyclical moving pattern. The oil volatility index (OVX), a measure of investor fear, plays a dominant role in the static and time-varying mean spillovers with risk aversion. OVX is an information transmitter supporting risk aversion in some crucial oil markets in terms of the static and dynamic volatility spillovers. The findings suggest that oil risk aversion is driven by OVX across time.