Structural breaks and volatility forecasting in the copper futures market

Journal of Futures Markets - Tập 38 Số 3 - Trang 290-339 - 2018
Xu Gong1, Boqiang Lin1
1School of Management, China Institute for Studies in Energy Policy, Collaborative Innovation Center for Energy Economics and Energy Policy, Xiamen University, Xiamen, Fujian, P. R. China

Tóm tắt

This paper examines whether structural breaks contain incremental information for forecasting the volatility of copper futures. Considering structural breaks in volatility, we develop four heterogeneous autoregressive (HAR) models based on classical or latest HAR‐type models. Subsequently, we apply these models to forecast volatility in the copper futures market. The empirical results reveal that our models exhibit better in‐sample and out‐of‐sample performances than classical or latest HAR‐type models. This suggests that structural breaks contain incremental prediction information for the volatility of copper futures. More importantly, we argue that considering structural breaks can improve the performances of most of existing HAR‐type models.Highlights There are many structural break points in return volatility of the copper futures. We propose 12 new heterogeneous autoregressive models. Our models outperform the existing heterogeneous autoregressive models. Structural breaks contain additional ex ante information for volatility forecasting. The ex ante information is obvious in forecasting mid‐ and long‐term volatilities.

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Thông tin xuất bản

Journal of Futures Markets

Tập 38 Số 3

290-339

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