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Forecasting Realized Gold Volatility: Is there a Role of Geopolitical Risks?

Author

Listed:
  • Konstantinos Gkillas

    (Department of Business Administration, University of Patras-University Campus, Rio, P.O. Box 1391, 26500 Patras, Greece)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Pretoria, South Africa)

  • Christian Pierdzioch

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

Abstract

We use a quantile-regression heterogeneous autoregressive realized volatility (QR-HARRV) model to study whether geopolitical risks have predictive value in sample and out-of-sample for realized gold-returns volatility estimated from intradaily data. We consider overall geopolitical risks along with a decomposition into actual risks (i.e., acts) and threats, and we control for overall the impact of economic policy uncertainty (EPU). We find that, after controlling for EPU, the components of geopolitical risks have predictive power for realized volatility mainly at a longer forecast horizon when we account for the potential asymmetry of the loss function a forecaster uses to evaluate forecasts.

Suggested Citation

  • Konstantinos Gkillas & Rangan Gupta & Christian Pierdzioch, 2019. "Forecasting Realized Gold Volatility: Is there a Role of Geopolitical Risks?," Working Papers 201943, University of Pretoria, Department of Economics.
  • Handle: RePEc:pre:wpaper:201943
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    References listed on IDEAS

    as
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    Keywords

    Gold-price returns; Realized volatility; Geopolitical risks; Forecasting;
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