Trück, Stefan and Liang, Kevin (2012) Modelling and Forecasting Volatility in the Gold Market. International Journal of Banking and Finance (IIJBF), 9 (1). pp. 48-80. ISSN 1675-7227

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Abstract

We investigate the volatility dynamics of gold markets. While there are a number of recent studies examining volatility and Value-at-Risk (VaR) measures in financial and commodity markets, none of them focuses on the gold market. We use a large number of statistical models to model and then forecast daily volatility and VaR. Both in-sample and out-of-sample forecasts are evaluated using appropriate evaluation measures. For in-sample forecasting, the class of TARCH models provide the best results. For out-of-sample forecasting, the results were not that clear-cut and the order and specification of the models were found to be an important factor in determining model’s performance. VaR for traders with long and short positions were evaluated by comparing failure rates and a simple AR as well as a TARCH model perform best for the considered back-testing period. Overall, most models outperform a benchmark random walk model, while none of the considered models perform significantly better than the rest with respect to all adopted criteria.

Item Type:	Article
Uncontrolled Keywords:	Gold markets, volatility, forecasting, value-at-risk, backtesting
Subjects:	H Social Sciences > HG Finance
Divisions:	School of Economics, Finance & Banking
Depositing User:	Mrs. Norazmilah Yaakub
Date Deposited:	25 Oct 2018 00:38
Last Modified:	25 Oct 2018 00:38
URI:	https://repo.uum.edu.my/id/eprint/25027

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