Forecasting volatility of the U.S. oil market

Erik Haugom, Henrik Langeland, Peter Molnár and Sjur Westgaard

Journal of Banking & Finance, 2014, vol. 47, issue C, 1-14

Abstract: We examine the information content of the CBOE Crude Oil Volatility Index (OVX) when forecasting realized volatility in the WTI futures market. Additionally, we study whether other market variables, such as volume, open interest, daily returns, bid-ask spread and the slope of the futures curve, contain predictive power beyond what is embedded in the implied volatility. In out-of-sample forecasting we find that econometric models based on realized volatility can be improved by including implied volatility and other variables. Our results show that including implied volatility significantly improves daily and weekly volatility forecasts; however, including other market variables significantly improves daily, weekly and monthly volatility forecasts.

Keywords: Oil prices; Realized volatility; Implied volatility; Volatility forecasting (search for similar items in EconPapers)
JEL-codes: G13 G14 L94 Q47 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (111)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:47:y:2014:i:c:p:1-14

DOI: 10.1016/j.jbankfin.2014.05.026

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