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

Salisu, Afees A; Swaray, Raymond

Authors

Afees A Salisu

Dr Raymond Swaray R.Swaray@hull.ac.uk
Senior Lecturer (Associate Professor) in Economics



Contributors

Stéphane Goutte
Editor

Duc Khuong Nguyen
Editor

Abstract

This chapter 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 out-of-sample predictability results for the return volatility. However, the study finds contrasting evidence between the pre-GFC and post-GFC periods.

Citation

Salisu, A. A., & Swaray, R. (in press). Forecasting the return volatility of energy prices: A GARCH-MIDAS approach. In S. Goutte, & D. K. Nguyen (Eds.), Handbook of energy finance: Theories, practices and simulations. World Scientific Publishing. https://doi.org/10.1142/11213

Acceptance Date Nov 15, 2017
Deposit Date Sep 3, 2019
Publicly Available Date Jan 12, 2018
Publisher World Scientific Publishing
Book Title Handbook of energy finance: Theories, practices and simulations
ISBN 978-981-3278-37-0
DOI https://doi.org/10.1142/11213
Public URL https://hull-repository.worktribe.com/output/498850
Publisher URL https://www.worldscientific.com/worldscibooks/10.1142/11213#t=aboutBook