Uncertainty, Spillovers, and Forecasts of the Realized Variance of Gold Returns
Using data for the group of G7 countries and China for the sample period 1996Q1 to 2020Q4, we study the role of uncertainty and spillovers for the out-of-sample forecasting of the realized variance of gold returns and its upside (good) and downside (bad) counterparts. We go beyond earlier research i...
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| Format: | Article |
| Language: | English |
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MDPI AG
2021-07-01
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| Series: | Mathematical and Computational Applications |
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| Online Access: | https://www.mdpi.com/2297-8747/26/3/49 |
| _version_ | 1797518278532268032 |
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| author | Rangan Gupta Christian Pierdzioch |
| author_facet | Rangan Gupta Christian Pierdzioch |
| author_sort | Rangan Gupta |
| collection | DOAJ |
| description | Using data for the group of G7 countries and China for the sample period 1996Q1 to 2020Q4, we study the role of uncertainty and spillovers for the out-of-sample forecasting of the realized variance of gold returns and its upside (good) and downside (bad) counterparts. We go beyond earlier research in that we do not focus exclusively on U.S.-based measures of uncertainty, and in that we account for international spillovers of uncertainty. Our results, based on the Lasso estimator, show that, across the various model configurations that we study, uncertainty has a more systematic effect on out-of-sample forecast accuracy than spillovers. Our results have important implications for investors in terms of, for example, pricing of related derivative securities and the development of portfolio-allocation strategies. |
| first_indexed | 2024-03-10T07:27:38Z |
| format | Article |
| id | doaj.art-0286dbc479f54e47bf2168815d893042 |
| institution | Directory Open Access Journal |
| issn | 1300-686X 2297-8747 |
| language | English |
| last_indexed | 2024-03-10T07:27:38Z |
| publishDate | 2021-07-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Mathematical and Computational Applications |
| spelling | doaj.art-0286dbc479f54e47bf2168815d8930422023-11-22T14:07:03ZengMDPI AGMathematical and Computational Applications1300-686X2297-87472021-07-012634910.3390/mca26030049Uncertainty, Spillovers, and Forecasts of the Realized Variance of Gold ReturnsRangan Gupta0Christian Pierdzioch1Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South AfricaDepartment of Economics, Helmut Schmidt University, Holstenhofweg 85, P.O. Box 700822, 22008 Hamburg, GermanyUsing data for the group of G7 countries and China for the sample period 1996Q1 to 2020Q4, we study the role of uncertainty and spillovers for the out-of-sample forecasting of the realized variance of gold returns and its upside (good) and downside (bad) counterparts. We go beyond earlier research in that we do not focus exclusively on U.S.-based measures of uncertainty, and in that we account for international spillovers of uncertainty. Our results, based on the Lasso estimator, show that, across the various model configurations that we study, uncertainty has a more systematic effect on out-of-sample forecast accuracy than spillovers. Our results have important implications for investors in terms of, for example, pricing of related derivative securities and the development of portfolio-allocation strategies.https://www.mdpi.com/2297-8747/26/3/49uncertaintyspilloversrealized variancegoldforecasting |
| spellingShingle | Rangan Gupta Christian Pierdzioch Uncertainty, Spillovers, and Forecasts of the Realized Variance of Gold Returns Mathematical and Computational Applications uncertainty spillovers realized variance gold forecasting |
| title | Uncertainty, Spillovers, and Forecasts of the Realized Variance of Gold Returns |
| title_full | Uncertainty, Spillovers, and Forecasts of the Realized Variance of Gold Returns |
| title_fullStr | Uncertainty, Spillovers, and Forecasts of the Realized Variance of Gold Returns |
| title_full_unstemmed | Uncertainty, Spillovers, and Forecasts of the Realized Variance of Gold Returns |
| title_short | Uncertainty, Spillovers, and Forecasts of the Realized Variance of Gold Returns |
| title_sort | uncertainty spillovers and forecasts of the realized variance of gold returns |
| topic | uncertainty spillovers realized variance gold forecasting |
| url | https://www.mdpi.com/2297-8747/26/3/49 |
| work_keys_str_mv | AT rangangupta uncertaintyspilloversandforecastsoftherealizedvarianceofgoldreturns AT christianpierdzioch uncertaintyspilloversandforecastsoftherealizedvarianceofgoldreturns |