The Impact of Jumps and Leverage in Forecasting the Co-Volatility of Oil and Gold Futures

Manabu Asai, Rangan Gupta and Michael McAleer

Energies, 2019, vol. 12, issue 17, 1-17

Abstract: This paper investigates the impact of jumps in forecasting co-volatility in the presence of leverage effects for daily crude oil and gold futures. We use a modified version of the jump-robust covariance estimator of Koike (2016), such that the estimated matrix is positive definite. Using this approach, we can disentangle the estimates of the integrated co-volatility matrix and jump variations from the quadratic covariation matrix. Empirical results show that more than 80% of the co-volatility of the two futures contains jump variations and that they have significant impacts on future co-volatility but that the impact is negligible in forecasting weekly and monthly horizons.

Keywords: commodity markets; co-volatility; forecasting; jump; leverage effects; realized covariance; threshold estimation (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (35)

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Related works:
Working Paper: The Impact of Jumps and Leverage in Forecasting the Co-Volatility of Oil and Gold Futures (2019)
Working Paper: The Impact of Jumps and Leverage in Forecasting the Co-Volatility of Oil and Gold Futures (2019)
Working Paper: The Impact of jumps and leverage in forecasting the co-volatility of oil and gold futures (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:gam:jeners:v:12:y:2019:i:17:p:3379-:d:263215

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