Forecasting gold futures market volatility using macroeconomic variables in the United States

Fang, Libing and Yu, Honghai and Xiao, Wen,(2018), Forecasting gold futures market volatility using macroeconomic variables in the United States. , Economic Modelling 72 (2018) 249–259, UNSPECIFIED

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The U.S. gold futures market has recently attracted significant attention and the gold volatility is closely linked to macroeconomics. As such, the question is how to analyze the impact of various macroeconomic variables on gold. We use the GARCH-MIDAS (mixed data sampling) model to investigate whether macroeconomic variables can improve the predictions on the volatility structure of U.S. gold futures. Our empirical results reveal that macroeconomic variables have a significant influence on gold volatility, especially during and after the global financial crisis, indicating macroeconomic variables are driving factors of the long-term volatility on the U.S. gold futures market. Additionally, we use principal component analysis to obtain key information on different macroeconomic variables and further investigate their joint effects on the volatility of gold futures, finding that the first and second principal components are good proxies of macroeconomic variables. Our results show that principal components improve forecast accuracy, as do macrovariables, which are robust to various forecast rolling window schemes.
Keywords : Gold futures volatility Macroeconomic variables GARCH-MIDAS model Forecast Principal component analysis, UNSPECIFIED
Journal or Publication Title: Economic Modelling 72 (2018) 249–259
Volume: 72
Item Type: Article
Subjects: Ekonomi Pembangunan
Depositing User: Elok Inajati
Date Deposited: 30 Dec 2019 05:08
Last Modified: 30 Dec 2019 05:08

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