Uncertainties and oil price volatility: Can lasso help?

In this study, we examine the predictive ability of G7 economic policy uncertainties (EPU) on oil market volatility using simple autoregressive and LASSO models. The out-of-sample empirical results show that the EPU of France is helpful for predicting crude oil volatility (WTI and Brent). More importantly, the LASSO model including the G7 uncertainties can exhibit the best predictive performance compared to other competing models based on different tests and during COVID-19.