Infectious Diseases, Market Uncertainty and Oil Market Volatility

We examine the predictive power of a daily newspaper-based index of uncertainty associated with infectious diseases (EMVID) for oil-market volatility. Using the heterogeneous autoregressive realized volatility (HAR-RV) model, we document a positive effect of the EMVID index on the realized volatilit...

Full description

Saved in:
Bibliographic Details
Published inEnergies (Basel) Vol. 13; no. 16; p. 4090
Main Authors Bouri, Elie, Demirer, Riza, Gupta, Rangan, Pierdzioch, Christian
Format Journal Article
LanguageEnglish
Published Basel MDPI AG 01.08.2020
Subjects
Autoregressive models
Coronaviruses
COVID-19
Crude oil
crude oil realized volatility
forecasting
Infectious diseases
Oil
Pandemics
Risk management
Stock exchanges
Uncertainty
Volatility
United States > US
Online AccessGet full text

Cover

More Information
Summary:We examine the predictive power of a daily newspaper-based index of uncertainty associated with infectious diseases (EMVID) for oil-market volatility. Using the heterogeneous autoregressive realized volatility (HAR-RV) model, we document a positive effect of the EMVID index on the realized volatility of crude oil prices at the highest level of statistical significance, within-sample. Importantly, we show that incorporating EMVID into a forecasting setting significantly improves the forecast accuracy of oil realized volatility at short-, medium-, and long-run horizons. Our findings comprise important implications for investors and risk managers during the unprecedented episode of high uncertainty resulting from the COVID-19 pandemic.
ISSN:1996-1073
1996-1073
DOI:10.3390/en13164090