Do Jumps and Co-jumps Improve Volatility Forecasting of Oil and Currency Markets?

Fredj Jawadi, Waël Louhichi, Hachmi Ben Ameur, and Zied Ftiti
Authors registered in the RePEc Author Service: Fredj JAWADI and Zied Ftiti ()

The Energy Journal, 2019, vol. Volume 40, issue Special Issue

Abstract: This paper aims at modeling and forecasting volatility in both oil and USD exchange rate markets using high frequency data. We test whether extreme co-movements (co-jumps) between these markets, as well as intraday unexpected news, help to improve volatility forecasting or not. Accordingly, we propose different extensions of Corsi (2009)'s model by including co-jumps and news. Our analysis provides two interesting findings. First, we find that both markets exhibit significant co-jumps driven by unexpected macroeconomic news. Second, we show that our model outperforms Corsi (2009)'s model and provides more accurate forecasts. In particular, while co-jumps constitute a key variable in forecasting oil price volatility, the unexpected news is relevant to forecasts of USD exchange rate volatility.

JEL-codes: F0 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (7)

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