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Forecasting the volatility of crude oil futures market: Does the simple 5-minute RV hold up?

Author

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  • Lyu, Yongjian
  • Yang, Zhidan
  • Luo, Ya
  • Qin, Zhilong
  • Yi, Heling
  • Ke, Rui

Abstract

Despite the extensive array of realized measures, there is no consensus on the optimal choice for forecasting oil price volatility. In this study, we examine the performance of 104 realized measures, with a particular emphasis on comparing these more sophisticated realized measures against the simple 5-min Realized Variance (RV). Our main findings are as follows: (1) The 5-min Realized Semivariance (RS) demonstrates the best performance among all realized measures; (2) Although many sophisticated realized measures theoretically surpass the simple 5-min RV, empirical evidence suggests that, aside from the 5-min RS, none of these sophisticated measures significantly improve the accuracy of oil price volatility forecasts; (3) The 5-min sampling frequency remains a reasonable choice for all realized measures in forecasting oil price volatility; (4) The portfolio based on the 5-min RS achieves the higher Sharpe ratio than most portfolios, with most portfolios failing to outperform the one constructed using the simple 5-min RV.

Suggested Citation

  • Lyu, Yongjian & Yang, Zhidan & Luo, Ya & Qin, Zhilong & Yi, Heling & Ke, Rui, 2025. "Forecasting the volatility of crude oil futures market: Does the simple 5-minute RV hold up?," Energy Economics, Elsevier, vol. 146(C).
    • Handle: RePEc:eee:eneeco:v:146:y:2025:i:c:s0140988325003330
    DOI: 10.1016/j.eneco.2025.108509
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