Economics at your fingertips  

Out-of-sample prediction of the oil futures market volatility: A comparison of new and traditional combination approaches

Yaojie Zhang, Feng Ma and Yu Wei

Energy Economics, 2019, vol. 81, issue C, 1109-1120

Abstract: This paper aims to use both the standard and iterated combination approaches to accurately predict the oil futures market volatility. We further make a comprehensive comparison of the out-of-sample forecasting performance between the two paired combination approaches. According to both the Diebold-Mariano test and model confidence set test, the iterated combination approach generates significantly more accurate volatility forecasts than the standard counterpart. The Direction-of-Change test suggests that the iterated combination approach also has substantially higher directional accuracy. We document that these results are robust to various settings. Furthermore, a mean-variance investor can obtain sizeable economic gains when she uses the iterated combination forecasts instead of the standard ones to allocate her portfolio.

Keywords: Oil futures market; Volatility forecasting; Forecast combination; Iterated combination; Asset allocation (search for similar items in EconPapers)
JEL-codes: C53 C58 G11 G17 Q47 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6) Track citations by RSS feed

Downloads: (external link)
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:

DOI: 10.1016/j.eneco.2019.05.018

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 Nithya Sathishkumar ().

Page updated 2021-03-09
Handle: RePEc:eee:eneeco:v:81:y:2019:i:c:p:1109-1120