Forecastability of Agricultural Commodity Futures Realised Volatility with Daily Infectious Disease-Related Uncertainty

Sisa Shiba, Goodness C. Aye, Rangan Gupta and Samrat Goswami
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Sisa Shiba: Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa
Goodness C. Aye: Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa
Samrat Goswami: Department of Rural Studies, Tripura University, Agartala 799022, Tripura, India

JRFM, 2022, vol. 15, issue 11, 1-15

Abstract: Given the food supply chain disruption from COVID-19 lockdowns around the world, we examine the predictive power of daily infectious diseases-related uncertainty (EMVID) on commodity traded futures within the agricultural bracket, sometimes known as the softs, using the heterogeneous autoregressive realised variance (HAR-RV) model. Considering the short-, medium-, and long-run recursive out-of-sample estimation approach, we estimate daily realised volatility by using intraday data within the 5 min interval for 15 agricultural commodity futures. During the COVID-19 episode, our results indicated that EMVID plays an important role in predicting the future path of agricultural commodity traded futures in the short, medium, and long run, i.e., h = 1, 5, and 22, respectively. According to the MSE-F test, these results are statistically significant. These results contain important implications for investors, portfolio managers, and speculators when faced with investment risk management and strategic asset allocation during infectious disease-related uncertainty.

Keywords: commodity futures; infectious disease-related uncertainty; forecasting; realised volatility (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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Working Paper: Forecastability of Agricultural Commodity Futures Realised Volatility with Daily Infectious Disease-Related Uncertainty (2022)
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