Journal
RESOURCES POLICY
Volume 75, Issue -, Pages -Publisher
ELSEVIER SCI LTD
DOI: 10.1016/j.resourpol.2021.102453
Keywords
China's crude oil futures volatility; MIDAS; Jump; Leverage effect; COVID-19 pandemic
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Funding
- Humanities and Social Science Fund of Ministry of Education of China [21YJA630107]
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This study focuses on the role of jumps and leverage in predicting the realized volatility of China's crude oil futures using a standard mixed data sampling (MIDAS) modeling framework. The in-sample results show the usefulness of jump and leverage effects in predicting the RV, with jumps having significant predictive power at the one-day-ahead horizon and leverage containing more useful information for long-term predictions. Additionally, the prediction model considering the leverage effect exhibits the best predictive power during the COVID-19 pandemic, as supported by robustness checks.
In this study, we focus on the role of jumps and leverage in predicting the realized volatility (RV) of China's crude oil futures. We employ a standard mixed data sampling (MIDAS) modeling framework. First, the in-sample results indicate that the jump and leverage effects are useful in predicting the RV of Chinese crude oil futures. Second, the out-of-sample results suggest that jump has very significant predictive power at the one-day-ahead horizon while the leverage effect contains more useful information for long-term predictions. Moreover, our results are supported by a number of robustness checks. Finally, we find new evidence that the prediction model that considers the leverage effect has the best predictive power during the COVID-19 pandemic.
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