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Article

El Niño, La Niña, and the Forecastability of the Realized Variance of Heating Oil Price Movements

1
Department of Economics, Eastern Mediterranean University, Famagusta 99268, Turkey
2
Adnan Kassar School of Business, Lebanese American University, Beirut P.O. Box 13-5053, Lebanon
3
Department of Economics, University of Pretoria, Pretoria 0002, South Africa
4
Department of Economics, Helmut Schmidt University, 22008 Hamburg, Germany
*
Author to whom correspondence should be addressed.
Academic Editor: Pallav Purohit
Sustainability 2021, 13(14), 7987; https://doi.org/10.3390/su13147987
Received: 4 June 2021 / Revised: 7 July 2021 / Accepted: 9 July 2021 / Published: 16 July 2021
(This article belongs to the Special Issue Energy Transition Amidst Global Energy Demand and Trade Studies)
We use the heterogenous autoregressive (HAR) model to compute out-of-sample forecasts of the monthly realized variance (RV) of movements of the spot and futures price of heating oil. We extend the HAR–RV model to include the role of El Niño and La Niña episodes, as captured by the Equatorial Southern Oscillation Index (EQSOI). Using data from June 1986 to April 2021, we show evidence for several model configurations that both El Niño and La Niña phases contain information useful for forecasting subsequent to the realized variance of price movements beyond the predictive value already captured by the HAR–RV model. The predictive value of La Niña phases, however, seems to be somewhat stronger than the predictive value of El Niño phases. Our results have important implications for investors, as well as from the perspective of sustainable decisions involving the environment. View Full-Text
Keywords: El Niño-Southern Oscillation; realized heating oil price volatility; heterogenous autoregression; forecasting El Niño-Southern Oscillation; realized heating oil price volatility; heterogenous autoregression; forecasting
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MDPI and ACS Style

Balcilar, M.; Bouri, E.; Gupta, R.; Pierdzioch, C. El Niño, La Niña, and the Forecastability of the Realized Variance of Heating Oil Price Movements. Sustainability 2021, 13, 7987. https://doi.org/10.3390/su13147987

AMA Style

Balcilar M, Bouri E, Gupta R, Pierdzioch C. El Niño, La Niña, and the Forecastability of the Realized Variance of Heating Oil Price Movements. Sustainability. 2021; 13(14):7987. https://doi.org/10.3390/su13147987

Chicago/Turabian Style

Balcilar, Mehmet, Elie Bouri, Rangan Gupta, and Christian Pierdzioch. 2021. "El Niño, La Niña, and the Forecastability of the Realized Variance of Heating Oil Price Movements" Sustainability 13, no. 14: 7987. https://doi.org/10.3390/su13147987

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