Prokopczuk, Marcel, Symeonidis, Lazaros and Wese Simen, Chardin 
ORCID: 0000-0003-4119-3024
(2016)
Do Jumps Matter for Volatility Forecasting? Evidence from Energy Markets.
Journal of Futures Markets, 36 (8).
pp. 758-792.
ISSN 0270-7314, 1096-9934
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Abstract
This paper characterizes the dynamics of jumps and analyzes their importance for volatility forecasting. Using high‐frequency data on four prominent energy markets, we perform a model‐free decomposition of realized variance into its continuous and discontinuous components. We find strong evidence of jumps in energy markets between 2007 and 2012. We then investigate the importance of jumps for volatility forecasting. To this end, we estimate and analyze the predictive ability of several Heterogenous Autoregressive (HAR) models that explicitly capture the dynamics of jumps. Conducting extensive in‐sample and out‐of‐sample analyses, we establish that explicitly modeling jumps does not significantly improve forecast accuracy. Our results are broadly consistent across our four energy markets, forecasting horizons, and loss functions.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | 3502 Banking, Finance and Investment, 35 Commerce, Management, Tourism and Services, 7 Affordable and Clean Energy |
| Depositing User: | Symplectic Admin |
| Date Deposited: | 22 Aug 2019 10:12 |
| Last Modified: | 12 Apr 2025 02:36 |
| DOI: | 10.1002/fut.21759 |
| Related Websites: | |
| URI: | https://livrepository.liverpool.ac.uk/id/eprint/3052242 |
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