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Volatility persistence and asymmetry under the microscope: The role of information demand for gold and oil

Author

Listed:
  • Georgios Bampinas

    () (Department of Economics, University of Macedonia, Greece)

  • Theodore Panagiotidis

    () (Department of Economics, University of Macedonia, Greece; Rimini Centre for Economic Analysis)

  • Christina Rouska

    () (Department of Economics, University of Macedonia, Greece)

Abstract

This study explores the relationship between Google search activity and the conditional volatility of oil and gold spot market returns. By aggregating the volume of queries related to the two commodity markets in the spirit of Da et al. (2015), we construct a weekly Searching Volume Index (SVI) for each market as proxy of households and investors information demand. We employ a rolling EGARCH framework to reveal how the significance of information demand has evolved through time. We find that higher information demand increases conditional volatility in gold and oil spot market returns. Information flows from Google SVIs reduce the proportion of the significant volatility asymmetry produced by negative shocks in both commodity markets. The latter is more profound in the gold market.

Suggested Citation

  • Georgios Bampinas & Theodore Panagiotidis & Christina Rouska, 2018. "Volatility persistence and asymmetry under the microscope: The role of information demand for gold and oil," Working Paper series 18-13, Rimini Centre for Economic Analysis.
  • Handle: RePEc:rim:rimwps:18-13
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    File URL: http://rcea.org/RePEc/pdf/wp18-13.pdf
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    References listed on IDEAS

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    Keywords

    Gold; Oil; Google Trends; Volatility; Asymmetry; EGARCH;

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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