 A Note on Oil Price Shocks and the Forecastability of Gold Realized VolatilityRiza Demirer, Rangan Gupta, Christian Pierdzioch and Syed Jawad Hussain Shahzad No 202010, Working Papers from University of Pretoria, Department of Economics Abstract: We examine the predictive power of disentangled oil price shocks over gold market volatility via the heterogeneous autoregressive realized volatility (HAR-RV) model. Our in- and out-of-sample tests show that combining the information from both oil supply and demand shocks with the innovations associated with financial market risks improves the forecast accuracy of realized volatility of gold. While financial risk shocks are important on their own, including oil price shocks in the model provides additional forecasting power in out-of-sample tests. Compared to the benchmark HAR-RV model, the extended model with all the three shocks included outperforms, in a statistically significant manner, all other variants of the HAR-RV framework for short-, medium, and long-run forecasting horizons. The findings highlight the predictive power of cross-market information in commodities and suggest that disentangling supply and demand related factors associated with price shocks could help improve the accuracy of forecasting models. Keywords: Oil Shocks; Risk Shocks; Gold; Realized Volatility; Forecasting (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:202010 Access Statistics for this paper More papers in Working Papers from University of Pretoria, Department of Economics Contact information at EDIRC. |
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