Exploring the influence of the main factors on the crude oil price volatility: An analysis based on GARCH-MIDAS model with Lasso approach

Jing Zhao

Resources Policy, 2022, vol. 79, issue C

Abstract: This paper comprehensively explores various influencing factors of crude oil price volatility from four perspectives: commodity attributes, macroeconomics factors, geopolitical events and alternative energy. On this basis, the generalized autoregressive conditional heteroscedasticity mixed frequency data sampling model (GARCH-MIDAS) is constructed with both level effect and volatility effect, single and multi-factor models. For variable selection in multi-factor models, the Lasso-adaptive method is utilized to solve multicollinearity problems. The findings show that the prediction performance of multi-factor models is better than single-factor models. In the long run, supply and demand continue to be the most influential factors of oil price volatility; inventories, the US dollar exchange rate and geopolitical risk all affect oil price volatility to roughly the same extent; alternative energy can have an impact on oil price fluctuations, but this impact is relatively minor.

Keywords: Crude oil price; GARCH-MIDAS model; Volatility forecasting; Adaptive-Lasso; Oil market fundamentals (search for similar items in EconPapers)
JEL-codes: C32 C51 C53 G12 Q41 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:79:y:2022:i:c:s0301420722004743

DOI: 10.1016/j.resourpol.2022.103031

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