Forecasting volatility and co-volatility of crude oil and gold futures: Effects of leverage, jumps, spillovers, and geopolitical risks

By Manabu Asai, Rangan Gupta, Michael Mcaleer. International Journal of Forecasting, 2020

134 citations recorded by the source corpus.

For purposes of forecasting the covariance matrix for the returns of crude oil and gold futures, this paper examines the effects of leverage, jumps, spillovers, and geopolitical risks, using their respective realized covariance matrices. In order to guarantee the positive definiteness of the forecasts, we consider the full BEKK structure on the conditional Wishart model. By the specification, we can divide flexibly the direct and spillover effects of volatility feedback, negative returns, and jumps. The empirical analysis indicates the benefits in accommodating the spillover effects of negative returns and the geopolitical risks indicator for modelling and forecasting the future covariance matrix.

Subfields: Economics and Econometrics, Renewable Energy, Sustainability and the Environment

View Paper: https://www.semanticscholar.org/paper/305b3ff9bc4fcd3e69e3ed6bfbcc0b292b596292

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Citations in the corpus

Infectious Diseases, Market Uncertainty and Oil Market Volatility (2020, background): “important properties of the realized volatility of oil prices, such as long memory and multi-scaling behavior [16,17].”