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Forecasting the oil futures price volatility: A new approach

Feng Ma, Jing Liu, Dengshi Huang and Wang Chen

Economic Modelling, 2017, vol. 64, issue C, 560-566

Abstract: This study provides a new perspective of modelling and forecasting realized range-based volatility (RRV) for crude oil futures. We are the first to improve the Heterogeneous Autoregressive model of Realized Range-based Volatility (HAR-RRV) model by considering the significant jump components, signed returns and volatility of realized range-based volatility. The empirical results show that the volatility of volatility significantly exists in the oil futures market. Moreover, our new proposed models with significant jump components, signed returns and volatility of volatility can gain higher forecast accuracy than HAR-RRV-type models. The results are robust to different forecasting windows and forecasting horizons. Our new findings are strategically important for investors making better decisions.

Keywords: C22; C52; C55; Volatility forecasting; Oil futures price; Realized range-based volatility; Volatility of realized range-based volatility; Model confidence set (search for similar items in EconPapers)
Date: 2017
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