Intraday volatility interaction between the crude oil and equity markets

This paper investigates the price volatility interaction between the crude oil and equity markets in the US using 5-min data over the period 2009–2012. Our main findings can be summarised as follows. First, we find strong evidence to demonstrate that the integration of the bid–ask spread and trading volume factors leads to a better performance in predicting price volatility. Second, trading information, such as bid–ask spread, trading volume, and the price volatility from cross-markets, improves the price volatility predictability for both in-sample and out-of-sample analyses. Third, the trading strategy based on the predictive regression model that includes trading information from both markets provides significant utility gains to mean-variance investors.