El Nino and Forecastability of Oil-Price Realized Volatility

Elie Bouri (), Rangan Gupta, Christian Pierdzioch and Afees Salisu

No 202105, Working Papers from University of Pretoria, Department of Economics

Abstract: In this paper, we forecast monthly realized volatility (RV) of the oil price based on an extended heterogenous autoregressive (HAR)-RV model that incorporates the role of the El Nino Southern Oscillation (ENSO), as captured by the Equatorial Southern Oscillation Index (EQSOI). Based on the period covering 1986:01 to 2020:12 and studying various rolling-estimation windows and forecast horizons, we find that the EQSOI has predictive value for oil-price RV particularly at forecast horizons from two to four years, and for rolling-estimation windows of length four to six years. We show that this result holds not only based on standard tests of out-of-sample predictability, but also under an asymmetric loss function.

Keywords: El Nino-Southern Oscillation, Realized Oil Volatility; Heterogenous Autoregression; Forecasting (search for similar items in EconPapers)
JEL-codes: C22 Q41 Q54 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2021-01
References: Add references at CitEc
Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:202105

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