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Less disagreement, better forecasts: adjusted risk measures in the energy futures market

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Listed:
  • Zhang, Ning
  • Gong, Yujing
  • Xue, Xiaohan

Abstract

This paper develops a generic adjustment framework to improve in the market risk forecasts of diverse risk forecasting models, which indicates the degree to which risk is under- and overestimated. In the context of the energy commodity market, a market in which tail risk management is of crucial importance, the empirical analysis shows that after this adjustment framework is applied, the forecasting performance of various risk models generally improves, as verified by a battery of backtesting methods. Additionally, our method also lessens the risk model disagreement among post-adjusted risk forecasts.

Suggested Citation

  • Zhang, Ning & Gong, Yujing & Xue, Xiaohan, 2023. "Less disagreement, better forecasts: adjusted risk measures in the energy futures market," LSE Research Online Documents on Economics 118451, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:118451
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    File URL: http://eprints.lse.ac.uk/118451/
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    energy futures; expected shortfall; finance; model disagreement; value at risk;
    All these keywords.

    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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