Forecast on silver futures linked with structural breaks and day-of-the-week effect

Wenlan Li, Yuxiang Cheng and Qiang Fang

The North American Journal of Economics and Finance, 2020, vol. 53, issue C

Abstract: Silver future is crucial to global financial markets. However, the existing literature rarely considers the impacts of structural breaks and day-of-the-week effect simultaneously on the volatility of silver future price. Based on heterogeneous autoregressive (HAR) theory, we establish six new type heterogeneous autoregressive (HAR) models by incorporating structural breaks and day-of-the-week effect to forecast the volatility. The empirical results indicate that new models’ accuracy is better than the original HAR model. We find that structural breaks and the day-of-the-week effect contain much forecasting information on silver forecasting. In addition, structural breaks have a positive effect on the silver futures’ volatility. Day-of-the-week effect has a significantly negative influence on silver futures’ price volatility, especially in the mid-term and the long-term. Our works is the first to combine the structural breaks and day-of-the-week effect to identify more market information. This paper provides a better forecasting method to predict silver future volatility.

Keywords: Volatility forecasting; HAR-type models; Silver futures market; Structural breaks; Day-of-the-week effect (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:53:y:2020:i:c:s1062940820300899

DOI: 10.1016/j.najef.2020.101192

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