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The international business cycle and gold-price fluctuations

Christian Pierdzioch, Marian Risse and Sebastian Rohloff

The Quarterly Review of Economics and Finance, 2014, vol. 54, issue 2, 292-305

Abstract: Drawing on recent empirical research, we study whether the international business cycle, as measured in terms of the output gaps of the G7 countries, has out-of-sample predictive power for gold-price fluctuations. To this end, we use a real-time forecasting approach that accounts for model uncertainty and model instability. We find some evidence that the international business cycle has predictive power for gold-price fluctuations. After accounting for transaction costs, a simple trading rule that builds on real-time out-of-sample forecasts does not lead to a superior performance relative to a buy-and-hold strategy. We also suggest a behavioral-finance approach to study the quality of out-of-sample forecasts from the perspective of forecasters with potentially asymmetric loss functions.

Keywords: Gold price; Real-time forecasting; International business cycle; Behavioral-finance approach (search for similar items in EconPapers)
JEL-codes: C53 E44 G11 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (34)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:54:y:2014:i:2:p:292-305

DOI: 10.1016/j.qref.2014.01.002

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