Closer is more important: The impact of Chinese and global macro-level determinants on Shanghai crude oil futures volatility

<p>Using the GARCH-MIDAS model, we investigated the impact of Chinese and global macro-level determinants on the return volatility of Shanghai crude oil futures, covering Chinese and global economic policy uncertainty, Chinese and global crude oil demand as well as production, Chinese crude oil import, and global crude oil speculation. The in-sample empirical results showed that Chinese crude oil demand, Chinese crude oil production, Chinese economic policy uncertainty, and global crude oil speculation have significant impact on the long-term volatility component of Shanghai crude oil futures. The out-of-sample prediction results show that Chinese current crude oil production and previous crude oil import have the relatively best predictive power for the return volatility of Shanghai crude oil futures. As a whole, Chinese domestic macro-factors have a stronger impact and higher predictive power on the return volatility of Shanghai crude oil futures compared with corresponding global macro-factors. Besides, the global crude oil speculation is the global macro-level determinant, which deserves most attention.</p>