EconPapers    
Economics at your fingertips  
 

Forecasting the oil futures price volatility: Large jumps and small jumps

Jing Liu, Feng Ma, Ke Yang and Yaojie Zhang

Energy Economics, 2018, vol. 72, issue C, 321-330

Abstract: Macro news drives jumps, however, a jump does not seem to improve the predictability of the simple heterogeneous autoregressive realized volatility model (HAR-RV) in the oil futures market. This paper provides a new insight and seeks to investigate whether truncated jumps can help improve the forecasting ability compared to that achieved using the HAR-RV model and its various extensions with jumps. Our results provide strong evidence that the models incorporating both large and small jumps gain a significantly superior forecasting ability. Specifically, including small jumps in a high-frequency model significantly improves the forecast accuracy at the 1-day forecasting horizon, while including both large and small jumps can achieve a higher forecast accuracy at the weekly and monthly horizons. These findings reveal that considering the decomposed jumps with a certain threshold can increase the forecast accuracy of the corresponding model.

Keywords: Volatility forecasting; oil futures price; Large and small jumps; Predictive evaluation (search for similar items in EconPapers)
JEL-codes: C22 C32 C52 C53 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0140988318301488
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:72:y:2018:i:c:p:321-330

Access Statistics for this article

Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2018-08-04
Handle: RePEc:eee:eneeco:v:72:y:2018:i:c:p:321-330