Forecasting value-at-risk in oil prices in the presence of volatility shifts
ORCID Identifiers
Document Type
Article
Source of Publication
Review of Financial Economics
Publication Date
7-1-2019
Abstract
© 2018 The University of New Orleans Recent evidence suggests shifts (structural breaks) in the volatility of returns causes non-normality by significantly increasing kurtosis. In this paper, we endogenously detect significant shifts in the volatility of oil prices and incorporate this information to estimate Value-at-Risk (VaR) to accurately forecast large declines in oil prices. Our out-of-sample performance results indicate that the model, which incorporates both time varying volatility (without making any distributional assumptions) and shifts in volatility, produces more accurate VaR forecasts than several benchmark methods. We make a timely contribution as the recent more frequent occurrences of unexpected large oil price declines has gained significant attention because of its substantial impact on the financial markets and the global economy.
DOI Link
ISSN
Publisher
Wiley-Blackwell
Volume
37
Issue
3
First Page
341
Last Page
350
Disciplines
Business
Keywords
GARCH, oil volatility, structural breaks
Scopus ID
Recommended Citation
Ewing, Bradley T.; Malik, Farooq; and Anjum, Hassan, "Forecasting value-at-risk in oil prices in the presence of volatility shifts" (2019). All Works. 1699.
https://zuscholars.zu.ac.ae/works/1699
Indexed in Scopus
yes
Open Access
no