The impact of jumps and leverage in forecasting the co-volatility of oil and gold futures

Loading...
Thumbnail Image

Authors

Asai, Manabu
Gupta, Rangan
McAleer, Michael

Journal Title

Journal ISSN

Volume Title

Publisher

MDPI Publishing

Abstract

This paper investigates the impact of jumps in forecasting co-volatility in the presence of leverage effects for daily crude oil and gold futures. We use a modified version of the jump-robust covariance estimator of Koike (2016), such that the estimated matrix is positive definite. Using this approach, we can disentangle the estimates of the integrated co-volatility matrix and jump variations from the quadratic covariation matrix. Empirical results show that more than 80% of the co-volatility of the two futures contains jump variations and that they have significant impacts on future co-volatility but that the impact is negligible in forecasting weekly and monthly horizons.

Description

Keywords

Commodity markets, Co-volatility, Forecasting, Jump, Leverage effects, Realized covariance, Threshold estimation

Sustainable Development Goals

Citation

Asai, M., Gupta, R. & McAleer, M. 2019, 'The impact of jumps and leverage in forecasting the co-volatility of oil and gold futures', Energies, vol. 12, art. 3379, pp. 1-17.