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Modeling dynamic higher moments of crude oil futures

Author

Listed:
  • Huang, Zhuo
  • Liang, Fang
  • Wang, Tianyi
  • Li, Chao

Abstract

This paper investigates the time-varying conditional higher moments of the daily returns on WTI crude oil futures, using the GJR-GARCH model with Gram-Charlier expansion (GCE) of normal density. The empirical results suggest significant time-variations in the conditional skewness and kurtosis. The out-of-sample value-at-risk (VaR) forecasting results show the advantage of models with dynamic higher moments over those with constant higher moments.

Suggested Citation

  • Huang, Zhuo & Liang, Fang & Wang, Tianyi & Li, Chao, 2021. "Modeling dynamic higher moments of crude oil futures," Finance Research Letters, Elsevier, vol. 39(C).
  • Handle: RePEc:eee:finlet:v:39:y:2021:i:c:s1544612319302727
    DOI: 10.1016/j.frl.2020.101570
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    References listed on IDEAS

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    More about this item

    Keywords

    Time-varying higher moments; GJR-GARCH; Gram-Charlier expansion; Value-at-risk;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • Q47 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy Forecasting

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