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Realized volatility forecasting and volatility spillovers: Evidence from Chinese non‐ferrous metals futures
Author(s) -
Wang Donghua,
Xin Yang,
Chang Xiaohui,
Su Xingze
Publication year - 2021
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/ijfe.1929
Subject(s) - volatility (finance) , futures contract , economics , econometrics , forward volatility , volatility swap , stochastic volatility , implied volatility , financial economics
We study the prediction of realized volatility of non‐ferrous metals futures traded on the Shanghai Futures Exchange from March 2011 to December 2017. A dynamic model averaging model is employed to combine multiple prediction models using time‐varying weights based on individual model performance. Empirical results also reveal that models incorporating volatility spillovers across metals are important for forecast combinations, and short‐term spillovers have a stronger impact than long‐term spillovers. This approach offers the best forecasting performance and allows users to identify the most dominant model at any given time and demonstrate when and how volatility transmission from another metal is valuable for forecasting. We also find evidence of distinct trading behaviours in emerging and developed markets.