Forecasting power of infectious diseases-related uncertainty for gold realized variance

Elie Bouri (), Konstantinos Gkillas, Rangan Gupta and Christian Pierdzioch

Finance Research Letters, 2021, vol. 42, issue C

Abstract: We examine the forecasting power of a daily newspaper-based index of uncertainty associated with infectious diseases (EMVID) for gold market returns volatility via the heterogeneous autoregressive realized variance (HAR-RV) model. Our results show that the EMVID index increases realized variance (RV) at the highest level of statistical significance within-sample, while it improves the forecast accuracy of gold realized variance at short-, medium-, and long-run horizons in a statistically significant manner. Importantly, by assessing the role of this index during the recent pandemic, we find strong evidence for its critical role in forecasting gold RV. Such evidence has important portfolio implications for investors during the current period of unprecedented levels of uncertainty resulting from the outbreak of COVID-19.

Keywords: Uncertainty; Infectious diseases; COVID-19; Gold; Realized variance; Forecasting (search for similar items in EconPapers)
JEL-codes: C22 C53 D80 Q02 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:42:y:2021:i:c:s1544612321000179

DOI: 10.1016/j.frl.2021.101936

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