Forecasting aggregate equity return volatility using crude oil price volatility: The role of nonlinearities and asymmetries

To assess the potential nonlinear predictive impact of crude oil price volatility on aggregate equity return volatility, we consider autoregressions of monthly aggregate equity return realized volatility augmented with nonlinear transformations of crude oil price realized volatility and evaluate if they improve point forecasts. Out-of-sample results based on data from 1885m1 through 1895m12 and from 1983m1 through 2017m12 illustrate that our...