Forecast on iron ore futures price linked with day-of-the-week effect

Iron ore futures price forecasting has been studied widely in recent years, and a wild range of variables that may have impacts on the price volatility was considered. However, the impacts of the day-of-the-week effect on the volatility of iron ore futures' price are still left undiscussed. Based on heterogeneous auto-regressive (HAR) theory, this paper establishes a new type of HAR model by considering the day-of-the-week effect in forecasting volatility. The empirical results indicate that, compared to the original HAR model, the new model's accuracy improves in the short terms. It also shows that the day-of-the-week effect has a significantly negative influence on iron ore futures' price volatility, especially on Monday and Tuesday. The result of this paper provides a new perspective in iron ore futures volatility forecasting.