Forecasting realized volatility of agricultural commodities
Research output: Contribution to journal › Research article › Contributed › peer-review
Contributors
Abstract
We forecast the realized and median realized volatility of agricultural commodities using variants of the heterogeneous autoregressive (HAR) model. We obtain tick-by-tick data on five widely-traded agricultural commodities (corn, rough rice, soybeans, sugar, and wheat) from the CME/ICE. Real out-of-sample forecasts are produced for between 1 and 66 days ahead. Our in-sample analysis shows that the variants of the HAR model which decompose volatility measures into their continuous path and jump components and incorporate leverage effects offer better fitting in the predictive regressions. However, we demonstrate convincingly that such HAR extensions do not offer any superior predictive ability in their out-of-sample results, since none of these extensions produce significantly better forecasts than the simple HAR model. Our results remain robust even when we evaluate them in a Value-at-Risk framework. Thus, there is no benefit from including more complexity, related to the volatility decomposition or relative transformations of the volatility, in the forecasting models.
Details
Original language | English |
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Pages (from-to) | 74-96 |
Number of pages | 23 |
Journal | International Journal of Forecasting |
Volume | 38 |
Issue number | 1 |
Publication status | Published - 1 Jan 2022 |
Peer-reviewed | Yes |
External IDs
ORCID | /0000-0003-4359-987X/work/142255152 |
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Keywords
ASJC Scopus subject areas
Keywords
- Agricultural commodities, Forecast, Heterogeneous autoregressive model, Median realized volatility, Realized volatility