UNCERTAINTY RELATED TO INFECTIOUS DISEASES AND FORECASTABILITY OF THE REALIZED VOLATILITY OF US TREASURY SECURITIES

Sisa Shiba and Rangan Gupta
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Sisa Shiba: Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa

Annals of Financial Economics (AFE), 2021, vol. 16, issue 02, 1-12

Abstract: This paper aims to examine the predictive power of the daily newspaper-based index uncertainty related to infectious diseases (EMVID) for the US Treasury securities’ realized volatility (RV) using the heterogonous autoregressive volatility (HAV-RV) model. In our out-of-sample forecast, we find strong significant evidence on the role of the EMVID index in forecasting the volatility of the US Treasury securities in the short-, medium- and long-run horizons except for the US 2-Year Treasury-Note (T-Note) Futures. Assessing the EMVID index role during the COVID-19 episode, we find that even in this short period, the index role in predicting the US Treasury securities is highly significant. These findings have important implications for portfolio managers and investors in times of unprecedented levels of uncertainty resulting from epidemic and pandemic diseases.

Keywords: Uncertainty; infectious diseases; COVID-19; US treasury securities; realized volatility; forecasting (search for similar items in EconPapers)
Date: 2021
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Working Paper: Uncertainty Related to Infectious Diseases and Forecastability of the Realised Volatility of US Treasury Securities (2021)
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DOI: 10.1142/S2010495221500081

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