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Investor Happiness and Predictability of the Realized Volatility of Oil Price

Matteo Bonato (), Konstantinos Gkillas (), Rangan Gupta () and Christian Pierdzioch
Additional contact information
Matteo Bonato: Department of Economics and Econometrics, University of Johannesburg, P.O. Box 524 Auckland Park, Johannesburg, South Africa
Konstantinos Gkillas: Department of Business Administration, University of Patras, University Campus, Rio, P.O. Box 1391, 26500 Patras, Greece

Sustainability, 2020, vol. 12, issue 10, 1-11

Abstract: We use the the heterogeneous autoregressive realized volatility (HAR-RV) model to analyze both in sample and out-of-sample whether a measure of investor happiness predicts the daily realized volatility of oil-price returns, where we use high-frequency intraday data to measure realized volatility. Full-sample estimates reveal that realized volatility is significantly negatively linked to investor happiness at a short forecast horizon. Similarly, out-of-sample results indicate that investor happiness significantly improves the accuracy of forecasts of realized volatility at a short forecast horizon. Results for a medium and a long forecast horizon are insignificant. We argue that our results shed light on the role played by speculation in oil products and the potential function of oil-related products as a hedge against risks in traditional financial assets.

Keywords: investor happiness; oil market; realized volatility; forecasting (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2020
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Working Paper: Investor Happiness and Predictability of the Realized Volatility of Oil Price (2020)
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