China's futures market volatility and sectoral stock market volatility prediction

Qing Zeng, Jixiang Zhang and Juandan Zhong

Energy Economics, 2024, vol. 132, issue C

Abstract: This study aims to investigate whether Chinese crude oil futures (INE) can provide forecasting information for ten industry-level stock indices. Empirical results show it has stronger predictability for Telecommunication Services and the Industrials sectors based on TVTP-MIDAS-INE model, which combines time-varying transition probabilities and INE volatility. A series of robustness checks including MCS method, alternative recursive window and the encompassing test confirm our results. Furthermore, the predictability of INE oil volatility performs better during periods of volatility and recession. This article adds to the current body of literature by investigating the predictability of INE oil volatility through an examination of sectoral stock indices.

Keywords: INE oil volatility; Sectoral stock market volatility; Regime switching; Predictability (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:132:y:2024:i:c:s0140988324001373

DOI: 10.1016/j.eneco.2024.107429

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