The course of realized volatility in the LME non-ferrous metal market

Neda Todorova

Economic Modelling, 2015, vol. 51, issue C, 1-12

Abstract: This study analyzes the volatility of LME futures contracts on aluminum, copper, lead, nickel and zinc using high-frequency data. The dynamics of realized volatility is studied over the period from January 2004 to September 2012 and is shown to be well captured with a rolling HAR-GARCH model. An increasing importance of short-term volatility components is evident across all metals in the aftermath of the global financial crisis and the related sharp decline in industrial metal prices. The heavier impact of short-term volatility corresponds consistently to a decreasing persistence of the volatility of realized volatility. In terms of predictive accuracy, even though leverage effects or GARCH-terms related to the volatility of realized volatility are characterized for the most part by significant in-sample parameters, the plain HAR model cannot be consistently outperformed by explicitly accounting for these stylized facts.

Keywords: Industrial metals; High-frequency data; HAR-GARCH model; Rolling estimation; Volatility forecasting (search for similar items in EconPapers)
JEL-codes: C13 C22 C53 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:51:y:2015:i:c:p:1-12

DOI: 10.1016/j.econmod.2015.07.005

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