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The Impact of Jumps and Leverage in Forecasting the Co-Volatility of Oil and Gold Futures

Manabu Asai, Rangan Gupta () and Michael McAleer

No EI2019-16, Econometric Institute Research Papers from Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute

Abstract: The paper investigates the impact of jumps in forecasting co-volatility in the presence of leverage effects. We modify the jump-robust covariance estimator of Koike (2016), such that the estimated matrix is positive definite. Using this approach, we can disentangle the estimates of the integrated co-volatility matrix and jump variations from the quadratic covariation matrix. Empirical results for daily crude oil and gold futures show that the co-jumps of the two futures have significant impacts on future co-volatility, but that the impact is negligible in forecasting weekly and monthly horizons

Keywords: Commodity Markets; Co-volatility; Forecasting; Jump; Leverage Effects; Realized; Covariance; Threshold Estimation. (search for similar items in EconPapers)
JEL-codes: C32 C33 C58 Q02 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm, nep-ene, nep-for and nep-rmg
Date: 2019-03-01
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https://repub.eur.nl/pub/115614/EI2019-16.pdf (application/pdf)

Related works:
Working Paper: The Impact of Jumps and Leverage in Forecasting the Co-Volatility of Oil and Gold Futures (2019)
Working Paper: The Impact of jumps and leverage in forecasting the co-volatility of oil and gold futures (2019) Downloads
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