Is the prediction of precious metal market volatility influenced by internet searches regarding uncertainty?

Wei Li, Junchao Zhang, Xiangye Cao and Wei Han

Finance Research Letters, 2024, vol. 62, issue PB

Abstract: There are countless articles on the relationship between economic uncertainty and the precious metals market, but studies examining whether economic uncertainty related queries (EURQ) can provide valuable information for the prediction of precious metal price volatility are scarce. Therefore, this paper examines the predictive power of EURQ for price volatility in the precious metals market with the GARCH-MIDAS model structure. The parametric results indicate a significant positive effect of the EURQ indicator on precious metal market volatility and mixed results for its asymmetric variation. Additionally, we investigate the performance of forecasting models that incorporate long- and short-term asymmetric effects from an out-of-sample perspective. We discover that using information from negative changes in returns and positive and negative shocks to the EURQ is more beneficial for forecasting precious metal futures price volatility than forecasting models that consider only a single indicator. Our findings emphasize the importance of queries on uncertainty-related topics in forecasting gold, silver, and copper price volatility and provide valuable guidance for rationally planning investment ratios.

Keywords: Uncertainty-related internet searches; Precious metals markets; Volatility forecasts (search for similar items in EconPapers)
JEL-codes: C22 C53 G15 G17 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:62:y:2024:i:pb:s154461232400299x

DOI: 10.1016/j.frl.2024.105269

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