Investor Happiness and Predictability of the Realized Volatility of Oil Price
Matteo Bonato (),
Konstantinos Gkillas (),
Rangan Gupta () and
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Matteo Bonato: Department of Economics and Econometrics, University of Johannesburg, Auckland Park, South Africa and IPAG Business School, 184 Boulevard Saint-Germain, 75006 Paris, France
Konstantinos Gkillas: Department of Business Administration, University of Patras – University Campus, Rio, P.O. Box 1391, 26500 Patras, Greece
No 202009, Working Papers from University of Pretoria, Department of Economics
We use the heterogeneous autoregressive realized volatility (HAR-RV) model to analyze both in sample and out-of-sample whether a measure of investor happiness predicts the daily realized volatility of oil-price returns, where we use high-frequency intradaily data to measure realized volatility. Full-sample estimates reveal that realized volatility is significantly negatively linked to investor happiness at a short forecast horizon. Similarly, out-of-sample results indicate that investor happiness significantly improves accuracy of forecasts of realized volatility at a short forecast horizon. Results for a medium and a long forecast horizon are insignificant. We argue that our results shed light on the role played by speculation in oil products and the potential function of oil-related products as a hedge against risks in traditional financial assets.
Keywords: Investor Happiness; Oil market; Realized Volatility; Forecasting (search for similar items in EconPapers)
JEL-codes: G15 G17 Q02 (search for similar items in EconPapers)
Pages: 19 pages
New Economics Papers: this item is included in nep-ene, nep-for, nep-hap and nep-rmg
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Journal Article: Investor Happiness and Predictability of the Realized Volatility of Oil Price (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:202009
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