File(s) under permanent embargo
Intraday volatility interaction between the crude oil and equity markets
journal contributionposted on 01.01.2016, 00:00 authored by D H B Phan, Susan SharmaSusan Sharma, Paresh Narayan
This paper investigates the price volatility interaction between the crude oil and equity markets in the US using 5-min data over the period 2009-2012. Our main findings can be summarised as follows. First, we find strong evidence to demonstrate that the integration of the bid-ask spread and trading volume factors leads to a better performance in predicting price volatility. Second, trading information, such as bid-ask spread, trading volume, and the price volatility from cross-markets, improves the price volatility predictability for both in-sample and out-of-sample analyses. Third, the trading strategy based on the predictive regression model that includes trading information from both markets provides significant utility gains to mean-variance investors.