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Volatility forecasting across tanker freight rates: the role of oil price shocks

Konstantinos Gavriilidis, Dimos Kambouroudis, Katerina Tsakou () and Dimitris Tsouknidis ()
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Konstantinos Gavriilidis: Management School, University of Stirling
Dimos Kambouroudis: Management School, University of Stirling

No 2018-27, Working Papers from Swansea University, School of Management

Abstract: This paper examines whether the inclusion of oil price shocks of different origin as exogenous variables in a wide set of GARCH-X models improves the accuracy of their volatility forecasts for spot and 1-year time-charter tanker freight rates. Kilian's (2009) oil price shocks of different origin enter GARCH-X models which, among other stylized facts of the freight rates examined, take into account the presence of asymmetric and long-memory effects in tanker freight rates. The results reveal that the inclusion of aggregate oil demand shocks and precautionary oil-specific demand shocks (price) significantly improves the accuracy of the volatility forecasts drawn.

Keywords: volatility forecasting; tanker freight rates; oil price shocks; GARCH-X models. (search for similar items in EconPapers)
JEL-codes: G11 G12 G13 G14 G20 G24 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene
Date: 2018-03-02
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https://rahwebdav.swan.ac.uk/repec/pdf/WP2018-27.pdf First version, 2018 (application/pdf)

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