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Volatility forecasting across tanker freight rates: The role of oil price shocks

Konstantinos Gavriilidis, Dimos S. Kambouroudis, Katerina Tsakou () and Dimitris Tsouknidis ()

Transportation Research Part E: Logistics and Transportation Review, 2018, vol. 118, issue C, 376-391

Abstract: This paper examines whether the inclusion of oil price shocks of different origin as exogenous variables in a wide set of GARCH-X models improves the accuracy of their volatility forecasts for spot and 1-year time-charter tanker freight rates. Kilian’s (2009) oil price shocks of different origin enter GARCH-X models which, among other stylized facts of the tanker freight rates examined, take into account the presence of asymmetric and long-memory effects. The results reveal that the inclusion of aggregate oil demand and oil-specific (precautionary) demand shocks improves significantly the accuracy of the volatility forecasts drawn.

Keywords: Volatility forecasts; Tanker freight rates; Oil price shocks; GARCH-X models (search for similar items in EconPapers)
JEL-codes: G11 G12 G13 G14 G20 G24 (search for similar items in EconPapers)
Date: 2018
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