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Jumps in Oil Prices: The Role of Economic News

John Elder, Hong Miao, and Sanjay Ramchander

Year: 2013
Volume: Volume 34
Number: Number 3
DOI: 10.5547/01956574.34.3.10
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Abstract:
Previous research has been unable to identify a strong link between crude oil prices and economic news. We reexamine this relationship using high frequency intraday data and relatively new methodology to estimate jumps in oil prices. We find a surprisingly strong correspondence between high frequency jumps in oil prices and the arrival of new economic information, with the largest jumps tending to be preceded identifiable economic news. These results indicate that oil prices respond very rapidly to new economic data in ways that appear consistent with economic theory, and also suggest that economic news, rather than speculation unrelated to the economic environment, drives jumps in oil prices.



Do Jumps and Co-jumps Improve Volatility Forecasting of Oil and Currency Markets?

Fredj Jawadi, Waël Louhichi, Hachmi Ben Ameur, and Zied Ftiti

Year: 2019
Volume: Volume 40
Number: Special Issue
DOI: 10.5547/01956574.40.SI2.fjaw
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Abstract:
This paper aims at modeling and forecasting volatility in both oil and USD exchange rate markets using high frequency data. We test whether extreme co-movements (co-jumps) between these markets, as well as intraday unexpected news, help to improve volatility forecasting or not. Accordingly, we propose different extensions of Corsi (2009)'s model by including co-jumps and news. Our analysis provides two interesting findings. First, we find that both markets exhibit significant co-jumps driven by unexpected macroeconomic news. Second, we show that our model outperforms Corsi (2009)'s model and provides more accurate forecasts. In particular, while co-jumps constitute a key variable in forecasting oil price volatility, the unexpected news is relevant to forecasts of USD exchange rate volatility.





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