Regime-Switching Fractionally Integrated Asymmetric Power Neural Network Modeling of Nonlinear Contagion for Chaotic Oil and Precious Metal Volatilities

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BİLDİRİCİ M. E., ERSİN Ö. Ö.

Fractal and Fractional, cilt.6, sa.12, 2022 (SCI-Expanded) identifier identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 6 Sayı: 12
  • Basım Tarihi: 2022
  • Doi Numarası: 10.3390/fractalfract6120703
  • Dergi Adı: Fractal and Fractional
  • Derginin Tarandığı İndeksler: Science Citation Index Expanded (SCI-EXPANDED), Social Sciences Citation Index (SSCI), Scopus, INSPEC, Directory of Open Access Journals
  • Anahtar Kelimeler: fractional integration, entropy, multi-layer perceptron, precious metals, oil prices, energy, GARCH, volatility
  • İstanbul Ticaret Üniversitesi Adresli: Evet

Özet

This paper aims at analyzing nonlinear dependence between fractionally integrated, chaotic precious metal and oil prices and volatilities. With this respect, the Markov regime-switching fractionally integrated asymmetric power versions of generalized autoregressive conditional volatility copula (MS-FIAPGARCH-copula) method are further extended to multi-layer perceptron (MLP)-based neural networks copula (MS-FIAPGARCH-MLP-copula). The models are utilized for modeling dependence between daily oil, copper, gold, platinum and silver prices, covering a period from 1 January 1990–25 March 2022. Kolmogorov and Shannon entropy and the largest Lyapunov exponents reveal uncertainty and chaos. Empirical findings show that: i. neural network-augmented nonlinear MS-FIAPGARCH-MLP-copula displayed significant gains in terms of forecasts; ii. asymmetric and nonlinear processes are modeled effectively with the proposed model, iii. important insights are derived with the proposed method, which highlight nonlinear tail dependence. Results suggest, given long memory and chaotic structures, that policy interventions must be kept at lowest levels.