 Forecasting oil futures market volatility in a financialized world: Why speculative activities matterKam C. Chan, Leo H. Chan and Chi M. Nguyen The North American Journal of Economics and Finance, 2020, vol. 54, issue C Abstract: We analyze the relation between volatility and speculative activities in the crude oil futures market and provide short-term forecasts accordingly. By incorporating trading volume and opening interest (speculative ratio) into the volatility dynamics, we document the subtle interaction between the two measures of which the volatility-averse behavior of speculative activities plays a considerable role in the market. Moreover, by accounting for structural changes, we find significant evidence that this behavior currently becomes weaker than in the past, which implies the oil futures market is less informative and/or less risk-averse in recent time period. Our forecasts based on these features perform very well under the predictive preferences that are consistent with the volatility-averse behavior in the oil futures market. We provide discussions and policy inferences. Keywords: Oil futures; Volatility forecasts; Speculative ratio (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:54:y:2020:i:c:s1062940818301153 DOI: 10.1016/j.najef.2018.10.009 Access Statistics for this article The North American Journal of Economics and Finance is currently edited by Hamid Beladi More articles in The North American Journal of Economics and Finance from Elsevier |
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