More Attention to Macroeconomic Risks and Better Forecasting of Energy Volatility

This paper introduces a new energy volatility‐aligned macroeconomic attention index, constructed via partial least squares to filter noise from existing macroeconomic attention proxies and enhance forecasting accuracy. The proposed index demonstrates robust in‐sample and out‐of‐sample predictive power for energy commodity volatility—across the energy index and its six components—over horizons up to 6 months. This predictability remains statistically significant after extensive robustness checks. Furthermore, the index delivers economically meaningful utility gains for mean–variance investors. Overall, this study sheds new light on energy commodity volatility's prediction from the perspective of macroeconomic fundamentals.