Economics at your fingertips  

The Predictive Power of Oil Price Shocks on Realized Volatility of Oil: A Note

Riza Demirer (), Rangan Gupta (), Christian Pierdzioch and Syed Jawad Hussain Shahzad ()

No 202044, Working Papers from University of Pretoria, Department of Economics

Abstract: This paper examines the predictive power of oil supply, demand and risk shocks over the realized volatility of intraday oil returns. Utilizing the heterogeneous autoregressive realized volatility (HAR-RV) framework, we show that all shock terms on their own, and particularly financial market driven risk shocks, significantly improve the forecasting performance of the benchmark HAR-RV model, both in- and out-of-sample. Incorporating all three shocks simultaneously in the HAR-RV model yields the largest forecasting gains compared to all other variants of the HAR-RV model, consistently at short-, medium-, and long forecasting horizons. The findings highlight the predictive information captured by disentangled oil price shocks in accurately forecasting oil market volatility, offering a valuable opening for investors and corporations to monitor oil market volatility using information on traded assets at high frequency.

Keywords: Oil Price Shocks; Risk Shocks; Oil; Realized Volatility; Forecasting (search for similar items in EconPapers)
JEL-codes: C22 C53 Q02 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2020-05
References: Add references at CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: The predictive power of oil price shocks on realized volatility of oil: A note (2020) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this paper

More papers in Working Papers from University of Pretoria, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Rangan Gupta ().

Page updated 2021-01-26
Handle: RePEc:pre:wpaper:202044