Does the OVX matter for volatility forecasting? Evidence from the crude oil market

In this paper, I investigate that whether the OVX and its truncated parts with a certain threshold can significantly help in forecasting the oil futures price volatility basing on the Heterogeneous Autoregressive model of Realized Volatility (HAR-RV). In-sample estimation results show that the OVX has a significantly positive impact on futures volatility. The impact of large OVX on future volatility has slightly powerful compared to the small ones. Moreover, the HARQ-RV model outperforms the HAR-RV in predicting the oil futures volatility. More importantly, the decomposed OVX have more powerful in forecasting the oil futures price volatility compared to the OVX itself.