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Investigating the asymmetric behavior of oil price volatility using support vector regression
University of Bergen, Norway.
Linnaeus University, School of Business and Economics, Department of Economics and Statistics.
2023 (English)In: Computational Economics, ISSN 0927-7099, E-ISSN 1572-9974, Vol. 61, p. 1765-1790Article in journal (Refereed) Published
Abstract [en]

This paper investigates the asymmetric behavior of oil price volatility using different types of Asymmetric Power ARCH (APARCH) model. We compare the estimation and forecasting performance of the models estimated from the maximum likelihood estimation (MLE) method and support vector machine (SVM) based regressions. Combining nonparametric SVM method with parametric APARCH model not only enables to keep interpretations of the parametric models but also leads to more precise estimation and forecasting results. Daily or weekly oil price volatility is investigated from March 8, 1991 to September 13, 2019. This whole sample period is split into four sub-periods based on the occurrence of certain economic events, and we examine whether the asymmetric behavior of the volatility exists in each sub-period. Our results indicate that SVM regression generally outperforms the other method with lower estimation and forecasting errors, and it is more robust to the choice of different APARCH models than the MLE counterparts are. Besides, the estimation results of the SVM based regressions in each sub-period show that the ARCH models with asymmetric power generally perform better than the models with symmetric power when the data sub-period includes large swings in oil price. The asymmetric behavior of oil price volatility, however, is not detected when the analysis is done using the whole sample period. This result underscores the importance of identifying the dynamics of the dataset in different periods to improve estimation and forecasting performance in modelling oil price volatility. This paper, therefore, examines volatility behavior of oil price with both methodological and economic underpinnings.

Place, publisher, year, edition, pages
Springer, 2023. Vol. 61, p. 1765-1790
National Category
Economics
Research subject
Economy, Economics
Identifiers
URN: urn:nbn:se:lnu:diva-111598DOI: 10.1007/s10614-022-10266-2ISI: 000791624200001Scopus ID: 2-s2.0-85129547424OAI: oai:DiVA.org:lnu-111598DiVA, id: diva2:1654120
Available from: 2022-04-26 Created: 2022-04-26 Last updated: 2023-06-20Bibliographically approved

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Karlsson, Hyunjoo Kim

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CiteExportLink to record
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  • apa
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  • de-DE
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