Forecasting realized volatility of agricultural commodities

Stavros Degiannakis, George Filis, Tony Klein and Thomas Walther

International Journal of Forecasting, 2022, vol. 38, issue 1, 74-96

Abstract: We forecast the realized and median realized volatility of agricultural commodities using variants of the heterogeneous autoregressive (HAR) model. We obtain tick-by-tick data on five widely-traded agricultural commodities (corn, rough rice, soybeans, sugar, and wheat) from the CME/ICE. Real out-of-sample forecasts are produced for between 1 and 66 days ahead. Our in-sample analysis shows that the variants of the HAR model which decompose volatility measures into their continuous path and jump components and incorporate leverage effects offer better fitting in the predictive regressions. However, we demonstrate convincingly that such HAR extensions do not offer any superior predictive ability in their out-of-sample results, since none of these extensions produce significantly better forecasts than the simple HAR model. Our results remain robust even when we evaluate them in a Value-at-Risk framework. Thus, there is no benefit from including more complexity, related to the volatility decomposition or relative transformations of the volatility, in the forecasting models.

Keywords: Agricultural commodities; Realized volatility; Median realized volatility; Heterogeneous autoregressive model; Forecast (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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Working Paper: Forecasting Realized Volatility of Agricultural Commodities (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfor:v:38:y:2022:i:1:p:74-96

DOI: 10.1016/j.ijforecast.2019.08.011

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