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Investor Happiness and Predictability of the Realized Volatility of Oil Price

Matteo BonatoDepartment of Economics and Econometrics, University of Johannesburg, P.O. Box 524 Auckland Park, Johannesburg, South AfricaΚωνσταντίνος ΓκίλλαςDepartment of Business Administration, University of Patras, University Campus, Rio, P.O. Box 1391, 26500 Patras, GreeceRangan GuptaDepartment of Economics, University of Pretoria, Pretoria 0002, South AfricaChristian PierdziochDepartment of Economics, Helmut Schmidt University, Holstenhofweg 85, P.O. Box 700822, 22008 Hamburg, Germany

2020en

ABI

Annotatsiya

We use the the heterogeneous autoregressive realized volatility (HAR-RV) model to analyze both in sample and out-of-sample whether a measure of investor happiness predicts the daily realized volatility of oil-price returns, where we use high-frequency intraday data to measure realized volatility. Full-sample estimates reveal that realized volatility is significantly negatively linked to investor happiness at a short forecast horizon. Similarly, out-of-sample results indicate that investor happiness significantly improves the accuracy of forecasts of realized volatility at a short forecast horizon. Results for a medium and a long forecast horizon are insignificant. We argue that our results shed light on the role played by speculation in oil products and the potential function of oil-related products as a hedge against risks in traditional financial assets.

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DOI: 10.3390/su12104309

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