Economics at your fingertips  

Analyzing the economic sources of oil price volatility: An out-of-sample perspective

Fanyi Meng and Li Liu

Energy, 2019, vol. 177, issue C, 476-486

Abstract: The determinants of oil price changes have been extensively investigated in the literature. However, the economic source of its volatility receives much less attention in existing studies. In this paper, we investigate the predictive ability of macroeconomic variables to oil spot price volatility. Using a variety of predictive regressions, we find that some variables such as lagged oil production uncertainty and futures price volatility have significant effects on current oil volatility in-sample. However, adding any predictor to the autoregressive model cannot consistently improve the predictive ability from the out-of-sample perspective. We find the strong and significant predictability using forecast combinations. The revealed predictability is further demonstrated to be robust to the change of lag order and an alternative evaluation criterion of success ratio. Combination methods can provide more accurate density forecasts of realized volatility than the benchmark model.

Keywords: Crude oil; Realized volatility; Predictive regression; Forecast combination (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: 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:

Access Statistics for this article

Energy is currently edited by Henrik Lund and Mark J. Kaiser

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

Page updated 2019-08-24
Handle: RePEc:eee:energy:v:177:y:2019:i:c:p:476-486