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Does climate risk matter for gold price volatility?

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  • Zhu, Jiaji
  • Han, Wei
  • Zhang, Junchao

Abstract

This study utilizes predictive modelling and STL decomposition to revisit the potential driving effect of climate risk on gold price volatility and observes the utility benefits of this risk. We find that gold price volatility is negatively correlated with physical risk (El Niño). Moreover, the parameter estimation results provide evidence for the heterogeneous influence of SOI on gold price volatility. Moreover, we find evidence for the presence of the physical risk of climate change on the prediction of gold price volatility, where the extended model incorporating the seasonal component of SOI has a better prediction.

Suggested Citation

  • Zhu, Jiaji & Han, Wei & Zhang, Junchao, 2023. "Does climate risk matter for gold price volatility?," Finance Research Letters, Elsevier, vol. 58(PC).
    • Handle: RePEc:eee:finlet:v:58:y:2023:i:pc:s1544612323009169
    DOI: 10.1016/j.frl.2023.104544
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    More about this item

    Keywords

    El Niño-southern oscillation; Climate change; Gold market; Volatility 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
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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