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Modeling Jump and Continuous Components in the Volatility of Oil Futures

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Author Info

  • Tseng Tseng-Chan

    ()
    (Nan Kai University of Technology)

  • Chung Huimin

    ()
    (National Chiao Tung University)

  • Huang Chin-Sheng

    ()
    (National Yunlin University of Science and Technology)

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    Abstract

    In this study, we use the 'heterogeneous autoregressive' (HAR) model and replace all squared returns with a squared range to estimate realized range-based volatility (RRV) forecasts for oil futures prices. Our findings demonstrate that the HAR-RRV models, involving volatility measures with a realized range-based estimator, successfully capture the long-term memory behavior of volatility in oil futures contracts. We find that realized range-based bi-power variation (RBV), which is also immune to jumps, is a better regressor for future volatility prediction, significantly outperforming the AR model. Similar to the findings for financial markets, we also find that the jump components of RRV have little predictive power for oil futures contracts.

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    Bibliographic Info

    Article provided by De Gruyter in its journal Studies in Nonlinear Dynamics & Econometrics.

    Volume (Year): 13 (2009)
    Issue (Month): 3 (May)
    Pages: 1-30

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    Handle: RePEc:bpj:sndecm:v:13:y:2009:i:3:n:5

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    Web page: http://www.degruyter.com

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    Web: http://www.degruyter.com/view/j/snde

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    Cited by:
    1. Sévi, Benoît, 2014. "Forecasting the volatility of crude oil futures using intraday data," European Journal of Operational Research, Elsevier, vol. 235(3), pages 643-659.

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