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Forecasting the return volatility of energy prices: A GARCH MIDAS approach

Author

Listed:
  • Afees A. Salisu

    (Centre for Econometric and Allied Research, University of Ibadan)

  • Raymond Swaray

    (Economics Subject Group, University of Hull Business, University of Hull, Cottingham Road, UK)

Abstract

This paper offers an extension to the literature on energy prices by forecasting the return volatility of these prices using the GARCH-MIDAS approach. In addition to the realized volatility, it also evaluates the predictability of relevant macroeconomic information such as industrial growth and consumer prices (with and without energy components) in the predictive model for the return volatility of energy prices. The analyses are distinctly conducted for full-sample, pre-GFC and post-GFC periods. On average, the findings support the inclusion of these macroeconomic information particularly output growth and realized volatility as they yield good in-sample and outof- sample predictability results for the return volatility. However, the paper finds contrasting evidence between the pre-GFC and post-GFC periods.

Suggested Citation

  • Afees A. Salisu & Raymond Swaray, 2017. "Forecasting the return volatility of energy prices: A GARCH MIDAS approach," Working Papers 029, Centre for Econometric and Allied Research, University of Ibadan.
    • Handle: RePEc:cui:wpaper:0029
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    GARCH-MIDAS; energy prices; return volatility; realized volatility; industrial production; inflation;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • Q47 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy Forecasting

    NEP fields

    This paper has been announced in the following NEP Reports:

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