The use of ethanol as a vehicle fuel has reduced greenhouse gas emissions significantly. The introduction of ethanol has also led to a decrease in crude oil prices. Considering the economic and environmental significance of the biofuel markets, a strand of literature investigates the price and volatility dynamics of US ethanol prices. In this paper, in contrast to previous studies, we investigate whether information on structural breaks plays an important role in predicting US ethanol market volatility. Our findings reveal that generalized autoregressive conditional heteroskedasticity (GARCH) models incorporating these breaks improve the prediction of US ethanol market volatility. Furthermore, the persistence of volatility tends to decline when structural breaks are included in the GARCH models. We further note that the influence of good and bad news is properly assessed under such breaks. Our results suggest that ignoring such breaks could mislead the risk assessment procedure for the US biofuel industry. © 2020 Society of Industrial Chemistry and John Wiley & Sons Ltd

中文翻译：

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预测结构性突破下的乙醇价格波动

乙醇作为车辆燃料的使用已大大减少了温室气体的排放。乙醇的引入也导致原油价格下降。考虑到生物燃料市场的经济和环境意义，大量文献研究了美国乙醇价格的价格和波动动态。在本文中，与以前的研究相比，我们调查了有关结构性断裂的信息是否在预测美国乙醇市场波动中起重要作用。我们的发现表明，结合了这些突破的广义自回归条件异方差（GARCH）模型可以改善对美国乙醇市场波动的预测。此外，当GARCH模型包括结构性突破时，波动率的持续性趋于下降。我们进一步注意到，在这种情况下，好消息和坏消息的影响都得到了适当的评估。我们的结果表明，忽略此类中断可能会误导美国生物燃料行业的风险评估程序。©2020工业化学学会和John Wiley＆Sons Ltd