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Does oil price uncertainty matter in stock market volatility forecasting?

We analyze whether oil price uncertainty and U.S. stock uncertainty can simultaneously provide additional information to volatility forecast of six major stock indexes. For model settings, we find not only the uncertainty information of previous day, but that of previous week and month will also pro...

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Detalles Bibliográficos
Autores principales: Qin, Peng, Bai, Manying
Formato: Online Artículo Texto
Lenguaje:English
Publicado: Public Library of Science 2022
Materias:
Acceso en línea:https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9797064/
https://www.ncbi.nlm.nih.gov/pubmed/36576907
http://dx.doi.org/10.1371/journal.pone.0277319
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author Qin, Peng
Bai, Manying
author_facet Qin, Peng
Bai, Manying
author_sort Qin, Peng
collection PubMed
description We analyze whether oil price uncertainty and U.S. stock uncertainty can simultaneously provide additional information to volatility forecast of six major stock indexes. For model settings, we find not only the uncertainty information of previous day, but that of previous week and month will also provide incremental predictive power for the stock market volatility. Based on that, from in-sample and out-of-sample perspective, the empirical evidences imply separately incorporating oil price uncertainty into the model can significantly improve the stock market volatility forecasting performance, but the improvements vanish after controlling the effects of volatility spillover from U.S. stock market while the effect of U.S. stock uncertainty is nonnegligible and sustainable for stock volatility forecasting. We confirm this finding from average and dynamic perspective. We further proceed the process in longer-horizon volatility forecasting, the evidences cannot overturn our conclusion. This conclusion implies that we should be cautious about the stock volatility predictability based on the oil price uncertainty, which further provide some important implications for researchers, regulators and investors.
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spelling pubmed-97970642022-12-29 Does oil price uncertainty matter in stock market volatility forecasting? Qin, Peng Bai, Manying PLoS One Research Article We analyze whether oil price uncertainty and U.S. stock uncertainty can simultaneously provide additional information to volatility forecast of six major stock indexes. For model settings, we find not only the uncertainty information of previous day, but that of previous week and month will also provide incremental predictive power for the stock market volatility. Based on that, from in-sample and out-of-sample perspective, the empirical evidences imply separately incorporating oil price uncertainty into the model can significantly improve the stock market volatility forecasting performance, but the improvements vanish after controlling the effects of volatility spillover from U.S. stock market while the effect of U.S. stock uncertainty is nonnegligible and sustainable for stock volatility forecasting. We confirm this finding from average and dynamic perspective. We further proceed the process in longer-horizon volatility forecasting, the evidences cannot overturn our conclusion. This conclusion implies that we should be cautious about the stock volatility predictability based on the oil price uncertainty, which further provide some important implications for researchers, regulators and investors. Public Library of Science 2022-12-28 /pmc/articles/PMC9797064/ /pubmed/36576907 http://dx.doi.org/10.1371/journal.pone.0277319 Text en © 2022 Qin, Bai https://creativecommons.org/licenses/by/4.0/This is an open access article distributed under the terms of the Creative Commons Attribution License (https://creativecommons.org/licenses/by/4.0/) , which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.
spellingShingle Research Article
Qin, Peng
Bai, Manying
Does oil price uncertainty matter in stock market volatility forecasting?
title Does oil price uncertainty matter in stock market volatility forecasting?
title_full Does oil price uncertainty matter in stock market volatility forecasting?
title_fullStr Does oil price uncertainty matter in stock market volatility forecasting?
title_full_unstemmed Does oil price uncertainty matter in stock market volatility forecasting?
title_short Does oil price uncertainty matter in stock market volatility forecasting?
title_sort does oil price uncertainty matter in stock market volatility forecasting?
topic Research Article
url https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9797064/
https://www.ncbi.nlm.nih.gov/pubmed/36576907
http://dx.doi.org/10.1371/journal.pone.0277319
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