Predicting the volatility of major energy commodity prices: the dynamic persistence model

Jozef Baruník and Lukas Vacha

Papers from arXiv.org

Abstract: Time variation and persistence are crucial properties of volatility that are often studied separately in energy volatility forecasting models. Here, we propose a novel approach that allows shocks with heterogeneous persistence to vary smoothly over time, and thus model the two together. We argue that this is important because such dynamics arise naturally from the dynamic nature of shocks in energy commodities. We identify such dynamics from the data using localised regressions and build a model that significantly improves volatility forecasts. Such forecasting models, based on a rich persistence structure that varies smoothly over time, outperform state-of-the-art benchmark models and are particularly useful for forecasting over longer horizons.

Date: 2024-02, Revised 2024-07
New Economics Papers: this item is included in nep-ecm, nep-ene and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/2402.01354 Latest version (application/pdf)

Related works:
Journal Article: Predicting the volatility of major energy commodity prices: The dynamic persistence model (2024)
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:arx:papers:2402.01354

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().