Uncertainties and oil price volatility: Can lasso help?

Xinyu Li, Meng Wu, Luqi Yuan, Meng Xiao, Ronghao Zhong and Miao Yu

Finance Research Letters, 2024, vol. 61, issue C

Abstract: In this study, we examine the predictive ability of G7 economic policy uncertainties (EPU) on oil market volatility using simple autoregressive and LASSO models. The out-of-sample empirical results show that the EPU of France is helpful for predicting crude oil volatility (WTI and Brent). More importantly, the LASSO model including the G7 uncertainties can exhibit the best predictive performance compared to other competing models based on different tests and during COVID-19.

Keywords: Oil price volatility; Uncertainties; Forecasting; Lasso (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:61:y:2024:i:c:s1544612323013351

DOI: 10.1016/j.frl.2023.104963

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