Forecasting Oil Futures Market Volatility in a Financialized World

Download or read book Forecasting Oil Futures Market Volatility in a Financialized World written by Kam C. Chan and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze the relation between volatility and speculative activities in the crude oil futures market and provide short-term forecasts accordingly. By incorporating trading volume and opening interest (speculative ratio) into the volatility dynamics, we document the subtle interaction between the two measures of which the volatility-averse behavior of speculative activities plays a considerable role in the market. Moreover, by accounting for structural changes, we find significant evidence that this behavior currently becomes weaker than in the past, which implies the oil futures market is less informative and/or less risk-averse in recent time period. Our forecasts based on these features perform very well under the predictive preferences that are consistent with the volatility-averse behavior in the oil futures market. We provide discussions and policy inferences.