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Dynamic jump intensities and news arrival in oil futures markets

Katherine B. Ensor (), Yu Han (), Barbara Ostdiek () and Stuart M. Turnbull ()
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Katherine B. Ensor: Rice University
Yu Han: Rice University
Barbara Ostdiek: Rice University
Stuart M. Turnbull: Glen Lyon Risk Management

Journal of Asset Management, 2020, vol. 21, issue 4, No 2, 292-325

Abstract: Abstract We introduce a new class of discrete-time models that explicitly recognize the impact of news arrival. The distribution of returns is governed by three factors: dynamics volatility and two Poisson compound processes, one for negative news and one for positive news. We show in a model-free environment that the arrival of negative and positive news has an asymmetric effect on oil futures returns and volatility. Using the first 12 futures contracts, our empirical results confirm that the effects of negative and positive news are described by different processes, a significant proportion of volatility is explained by news arrival and the impact of negative news is larger than that of positive news.

Date: 2020
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DOI: 10.1057/s41260-020-00168-z

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