The Impact of Jumps and Leverage in Forecasting the Co-Volatility of Oil and Gold Futures
Rangan Gupta () and
No 201925, Working Papers from University of Pretoria, Department of Economics
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-ene, nep-for, nep-mst and nep-rmg
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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)
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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:201925
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