Forecasting the Volatility of Crude Oil: The Role of Uncertainty and Spillovers

Rangan Gupta and Christian Pierdzioch

Energies, 2021, vol. 14, issue 14, 1-15

Abstract: We use a dataset for the group of G7 countries and China to study the out-of-sample predictive value of uncertainty and its international spillovers for the realized variance of crude oil (West Texas Intermediate and Brent) over the sample period from 1996Q1 to 2020Q4. Using the Lasso estimator, we found evidence that uncertainty and international spillovers had predictive value for the realized variance at intermediate (two quarters) and long (one year) forecasting horizons in several of the forecasting models that we studied. This result holds also for upside (good) and downside (bad) variance, and irrespective of whether we used a recursive or a rolling estimation window. Our results have important implications for investors and policymakers.

Keywords: uncertainty; spillovers; realized variance; crude oil; forecasting (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: 2021
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Citations: View citations in EconPapers (6)

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Working Paper: Forecasting the Volatility of Crude Oil: The Role of Uncertainty and Spillovers (2021)
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