Financial stress and oil market volatility: new evidence

This study investigates the effect of financial stress (financial stress index; FSI) on oil market realized volatility using Markov-regime switching MIDAS models. The empirical results show that FSI can remarkably improve the forecast accuracy of the oil market. Moreover, FSI measured by the United...

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Bibliographic Details
Published in:Applied economics letters 2023-01, Vol.30 (1), p.1-6
Main Authors: Pang, Dan, Ma, Feng, Wahab, M. I. M., Zhu, Bo
Format: Article
Language:English
Subjects:
Economic analysis
Economic factors
Economic stress
Economic theory
Economics
financial stress
Markov-regime switching
oil market
Petroleum
Realized volatility
Volatility
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Summary:This study investigates the effect of financial stress (financial stress index; FSI) on oil market realized volatility using Markov-regime switching MIDAS models. The empirical results show that FSI can remarkably improve the forecast accuracy of the oil market. Moreover, FSI measured by the United States can obtain more useful information than that measured by the world. Our findings are robust and reliable via alternative evaluation methods from both statistical and economic aspects.
ISSN:1350-4851
1466-4291
DOI:10.1080/13504851.2021.1969333