A detailed look at crude oil price volatility prediction using macroeconomic variables

Nima Nonejad

Journal of Forecasting, 2020, vol. 39, issue 7, 1119-1141

Abstract: We investigate whether crude oil price volatility is predictable by conditioning on macroeconomic variables. We consider a large number of predictors, take into account the possibility that relative predictive performance varies over the out‐of‐sample period, and shed light on the economic drivers of crude oil price volatility. Results using monthly data from 1983:M1 to 2018:M12 document that variables related to crude oil production, economic uncertainty and variables that either describe the current stance or provide information about the future state of the economy forecast crude oil price volatility at the population level 1 month ahead. On the other hand, evidence of finite‐sample predictability is very weak. A detailed examination of our out‐of‐sample results using the fluctuation test suggests that this is because relative predictive performance changes drastically over the out‐of‐sample period. The predictive power associated with the more successful macroeconomic variables concentrates around the Great Recession until 2015. They also generate the strongest signal of a decrease in the price of crude oil towards the end of 2008.

Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
https://doi.org/10.1002/for.2679

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:jforec:v:39:y:2020:i:7:p:1119-1141

Access Statistics for this article

Journal of Forecasting is currently edited by Derek W. Bunn

More articles in Journal of Forecasting from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().