Realized volatility forecasting and volatility spillovers: Evidence from Chinese non‐ferrous metals futures

We study the prediction of realized volatility of non‐ferrous metals futures traded on the Shanghai Futures Exchange from March 2011 to December 2017. A dynamic model averaging model is employed to combine multiple prediction models using time‐varying weights based on individual model performance. Empirical results also reveal that models incorporating volatility spillovers across metals are important for forecast combinations, and short‐term spillovers have a stronger impact than long‐term spillovers. This approach offers the best forecasting performance and allows users to identify the most dominant model at any given time and demonstrate when and how volatility transmission from another metal is valuable for forecasting. We also find evidence of distinct trading behaviours in emerging and developed markets.