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Forecasting the density of returns in crude oil futures markets

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  • Julien Chevallier

Abstract

Using tick-by-tick data for the WTI crude oil (2001-2010) market, this paper relies on the recent bivariate model by Maheu and McCurdy and compares the forecast accuracy of the density of returns with the HAR-RV model at different horizons upto 60 days. Our results provide evidence of the incremental information for density forecasting embedded in intraday data when the model is compared with the univariate EGARCH model. Turning to the comparison between the forecasting power of the realised volatility, which includes the total quadratic variation, vs. Bipower Variation (BPV) and median realised volatility, which only estimates the diffusive component, it is shown that the additional information contained in the jump component is significant on average. The findings for WTI crude oil futures confirm the importance of considering the continuous/jump decomposition for density forecasting.

Suggested Citation

  • Julien Chevallier, 2015. "Forecasting the density of returns in crude oil futures markets," International Journal of Global Energy Issues, Inderscience Enterprises Ltd, vol. 38(4/5/6), pages 201-231.
    • Handle: RePEc:ids:ijgeni:v:38:y:2015:i:4/5/6:p:201-231
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    Cited by:

    1. Feng Ma & Yu Wei & Wang Chen & Feng He, 2018. "Forecasting the volatility of crude oil futures using high-frequency data: further evidence," Empirical Economics, Springer, vol. 55(2), pages 653-678, September.

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