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Uncertainty, Spillovers, and Forecasts of the Realized Variance of Gold Returns

Author

Listed:
  • Rangan Gupta

    (Department of Economics, University of Pretoria, Private Bag X20, Hatfield, 0028, South Africa)

  • Christian Pierdzioch

    (Department of Economics, Helmut Schmidt University, Holstenhofweg 85, P.O.B. 700822, 22008 Hamburg, Germany)

Abstract

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. 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.

Suggested Citation

  • Rangan Gupta & Christian Pierdzioch, 2021. "Uncertainty, Spillovers, and Forecasts of the Realized Variance of Gold Returns," Working Papers 202137, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:202137
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    More about this item

    Keywords

    Uncertainty; Spillovers; Realized variance; Gold; Forecasting;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market

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