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The role of global economic conditions in forecasting gold market volatility: Evidence from a GARCH-MIDAS approach

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  • Salisu, Afees A.
  • Gupta, Rangan
  • Bouri, Elie
  • Ji, Qiang

Abstract

In this study, we examine the role of global economic conditions in the predictability of gold market volatility using alternative measures. Based on the available data frequency for the relevant series, we adopt the GARCH-MIDAS approach which allows for mixed-data frequencies. We find that global economic conditions contribute significantly to gold market volatility, albeit with mixed outcomes. While the results also lend support to the safe-haven properties of the gold market, the outcome can be influenced by the choice of measure for global economic conditions. For completeness, we extend the analyses to other precious metals (palladium, platinum, rhodium and silver) and find that the global economic conditions forecast the return volatility of the gold market better than these other precious metals. Our results are robust to multiple forecast horizons and offer useful insights on the plausible investment choices in the precious metals market.

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  • Salisu, Afees A. & Gupta, Rangan & Bouri, Elie & Ji, Qiang, 2020. "The role of global economic conditions in forecasting gold market volatility: Evidence from a GARCH-MIDAS approach," Research in International Business and Finance, Elsevier, vol. 54(C).
    • Handle: RePEc:eee:riibaf:v:54:y:2020:i:c:s0275531920307273
    DOI: 10.1016/j.ribaf.2020.101308
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    More about this item

    Keywords

    Precious metals volatility; Global economic conditions; Mixed-frequency;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market

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