The forecasting power of EPU for crude oil return volatility

Artikel

Economic policy uncertainty (EPU) has important implications for crude oil market. To explore the implications, this paper investigates the impact of EPU on the crude oil return volatility and which EPU index has the most forecasting power in crude oil market. To this end, we employ the GARCH-MIDAS model which can incorporate lower frequency EPU index variable with higher frequency crude oil return variable effectively. We find that EPU has a positive and significant impact on the crude oil return volatility, but the effect is short-lived and the decay period is about one year. Particularly, our results show that the US EPU index has the best forecasting power for crude oil return volatility over the long-term, whereas China EPU index has the best forecasting performance in the past one year. Our findings have important implications on risk management for investors in crude oil market.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Journal: Energy Reports ; ISSN: 2352-4847 ; Volume: 5 ; Year: 2019 ; Pages: 866-873 ; Amsterdam: Elsevier

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Financial Econometrics ; Business Fluctuations; Cycles ; Energy: Demand and Supply; Prices ; Energy Forecasting
• Thema: Crude-oil return volatility ; Economic policy uncertainty ; EPU index ; GARCH-MIDAS

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Ma, Rufei ; Zhou, Changfeng ; Cai, Huan ; Deng, Chengtao
• Ereignis: Veröffentlichung
• (wer): Elsevier
• (wo): Amsterdam
• (wann): 2019

Weitere Informationen

• DOI: doi:10.1016/j.egyr.2019.07.002
• Handle: http://hdl.handle.net/10419/243634
• Letzte Aktualisierung: 10.03.2025, 11:44 MEZ