Forecasting the Realized Variance of Oil-Price Returns: A Disaggregated Analysis of the Role of Uncertainty and Geopolitical Risk

Rangan Gupta and Christian Pierdzioch

No 202176, Working Papers from University of Pretoria, Department of Economics

Abstract: We contribute to the empirical literature on the predictability of oil-market volatility by comparing the predictive role of aggregate versus several disaggregated metrics of policy-related and equity-market uncertainties of the U.S. and geopolitical risks for forecasting the future realized volatility of oil-price (WTI) returns over the monthly period from 1985:01 to 2021:08. We find that using the disaggregated metrics as predictors improves the accuracy of forecasts at intermediate and long forecast horizons, and mainly when we use random forests to estimate our forecasting model.

Keywords: Realized variance; Oil Price; Forecasting; Uncertainty; Geopolitical Risk (search for similar items in EconPapers)
JEL-codes: C22 C53 Q02 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2021-10
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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:202176

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