Forecasting realized volatility of agricultural commodities

Research output: Contribution to journalResearch articleContributedpeer-review

Contributors

  • Stavros Degiannakis - , Panteion University of Social and Political Sciences (Author)
  • George Filis - , Bournemouth University (Author)
  • Tony Klein - , Queen's University Belfast (Author)
  • Thomas Walther - , Faculty of Business and Economics, Utrecht University (Author)

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 languageEnglish
Pages (from-to)74-96
Number of pages23
JournalInternational Journal of Forecasting
Volume38
Issue number1
Publication statusPublished - 1 Jan 2022
Peer-reviewedYes

External IDs

ORCID /0000-0003-4359-987X/work/142255152

Keywords

ASJC Scopus subject areas

Keywords

  • Agricultural commodities, Forecast, Heterogeneous autoregressive model, Median realized volatility, Realized volatility

Library keywords