Forecasting Volatility and Co-volatility of Crude Oil and Gold Futures: Effects of Leverage, Jumps, Spillovers, and Geopolitical Risks
Rangan Gupta () and
No 201951, Working Papers from University of Pretoria, Department of Economics
For purposes of forecasting the covariance matrix for the returns of crude oil and gold futures, this paper examines the effects of leverage, jumps, spillovers, and geopolitical risks, using their respective realized covariance matrices. In order to guarantee the positive definiteness of the forecasts, we consider the full BEKK structure on the conditional Wishart model. By the specification, we can divide flexibly the direct and spillover effects of volatility feedback, negative returns, and jumps. The empirical analysis indicates the benefits in accommodating the spillover effects of negative returns and the geopolitical risks indicator for modelling and forecasting the future covariance matrix.
Keywords: Commodity Markets; Co-volatility; Forecasting; Geopolitical Risks; Jumps; Leverage Effects; Spillover Effects; Realized Covariance (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-ore and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:201951
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