Investor happiness and predictability of the realized volatility of oil price
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Date
Authors
Bonato, Matteo
Gkillas, Konstantinos
Gupta, Rangan
Pierdzioch, Christian
Journal Title
Journal ISSN
Volume Title
Publisher
MDPI Publishing
Abstract
We use the the heterogeneous autoregressive realized volatility (HAR-RV) model to analyze
both in sample and out-of-sample whether a measure of investor happiness predicts the daily
realized volatility of oil-price returns, where we use high-frequency intraday data to measure realized
volatility. Full-sample estimates reveal that realized volatility is significantly negatively linked to
investor happiness at a short forecast horizon. Similarly, out-of-sample results indicate that investor
happiness significantly improves the accuracy of forecasts of realized volatility at a short forecast
horizon. Results for a medium and a long forecast horizon are insignificant. We argue that our results
shed light on the role played by speculation in oil products and the potential function of oil-related
products as a hedge against risks in traditional financial assets.
Description
Keywords
Investor happiness, Oil market, Realized volatility, Forecasting, Heterogeneous autoregressive realized volatility (HAR-RV)
Sustainable Development Goals
Citation
Bonato, M., Gkillas, K., Gupta, R. et al. 2020, 'Investor happiness and predictability of the realized volatility of oil price', Sustainability, vol. 13, art. 4309, pp. 1-11.