Do jumps matter for volatility forecasting? Evidence from energy markets

Prokopczuk, Marcel, Symeonidis, Lazaros and Wese Simen, Chardin (2016) Do jumps matter for volatility forecasting? Evidence from energy markets. Journal of Futures Markets, 36 (8). pp. 758-792. ISSN 0270-7314

[thumbnail of Manuscript]
PDF (Manuscript) - Accepted Version
Download (267kB) | Preview


This paper characterizes the dynamics of jumps and analyzes their importance for volatility forecasting. Using high-frequency data on four prominent energy markets, we perform a model-free decomposition of realized variance into its continuous and discontinuous components. We find strong evidence of jumps in energy markets between 2007 and 2012. We then investigate the importance of jumps for volatility forecasting. To this end, we estimate and analyze the predictive ability of several Heterogenous Autoregressive (HAR) models that explicitly capture the dynamics of jumps. Conducting extensive in-sample and out-of-sample analyses, we establish that explicitly modeling jumps does not significantly improve forecast accuracy. Our results are broadly consistent across our four energy markets, forecasting horizons and loss functions.

Item Type: Article
Uncontrolled Keywords: realized volatility,jumps,high-frequency data,volatility forecasting,forecast evaluation
Faculty \ School: Faculty of Social Sciences > Norwich Business School
UEA Research Groups: Faculty of Social Sciences > Research Groups > Finance Group
Depositing User: Pure Connector
Date Deposited: 22 Mar 2016 09:09
Last Modified: 21 Oct 2022 01:15
DOI: 10.1002/fut.21759


Downloads per month over past year

Actions (login required)

View Item View Item