The Impact of Jumps and Leverage in Forecasting the Co-Volatility of Oil and Gold Futures

• Manabu Asai ^[1] ; Rangan Gupta ^[2] ; Michael McAleer ^[3]
  1. [1] Soka University

     Soka University

     Japón

     
  2. [2] University of Pretoria

     University of Pretoria

     City of Tshwane, Sudáfrica

     
  3. [3] University of Sydney

     University of Sydney

     Australia

     

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• Localización: Documentos de Trabajo (ICAE), ISSN-e 2341-2356, Nº. 12, 2019, págs. 1-25
• Idioma: inglés
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• Resumen

  • The paper investigates the impact of jumps in forecasting co-volatility in the presence of leverage effects. We modify the jump-robust covariance estimator of Koike (2016), such that the estimated matrix is positive definite. Using this approach, we can disentangle the estimates of the integrated co-volatility matrix and jump variations from the quadratic covariation matrix. Empirical results for daily crude oil and gold futures show that the co-jumps of the two futures have significant impacts on future co-volatility, but that the impact is negligible in forecasting weekly and monthly horizons.