United States Oil Fund volatility prediction: the roles of leverage effect and jumps

Chao Liang (), Yin Liao (), Feng Ma () and Bo Zhu ()
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Chao Liang: Southwest Jiaotong University
Yin Liao: Macquarie University
Feng Ma: Southwest Jiaotong University
Bo Zhu: Southwest Jiaotong University

Empirical Economics, 2022, vol. 62, issue 5, No 7, 2239-2262

Abstract: Abstract We investigate United States Oil Fund volatility predictions using a mixed data sampling modeling framework. There are several vital findings. First, our in-sample analysis shows that both the leverage effect and intraday jumps have a significant impact on the United States Oil Fund realized volatility. Second, our out-of-sample analyses suggest that incorporating the leverage effect can largely improve the United States Oil Fund realized volatility forecasts. Third, using a portfolio exercise, we show that the improved realized volatility forecasts lead to significantly increased economic values. Our results are confirmed by a wide range of robustness checks.

Keywords: Crude oil fund; Realized volatility; Leverage effect; Jumps; Economic significance (search for similar items in EconPapers)
JEL-codes: C53 E27 E37 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (8)

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DOI: 10.1007/s00181-021-02093-5

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