A NEW EMPIRICAL INVESTIGATION OF THE PLATINUM SPOT RETURNS

Simone Kruse, Thomas Tischer and Timo Wittig
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Simone Kruse: University of Mannheim
Thomas Tischer: Deutsche Bundesbank
Timo Wittig: University of Bayreuth

Journal of Smart Economic Growth, 2017, vol. 2, issue 2, 141-148

Abstract: The global platinum market has been in downturn and unstable for five consecutive years, and thus market participants are demanding effective quantitative risk management tools. Since platinum is so widely used and serves as an important investment vehicle, the importance of risk management of platinum spot returns cannot be understated. In this paper, we take advantage of a very popular econometric model, the generalized autoregressive conditional heteroscedasticity (GARCH) model, for platinum returns. We received two important findings by using the conventional GARCH models in explain daily platinum spot returns. First, it is crucial to introduce heavy-tailed distribution to explain conditional heavy tails; and second, the NRIG distribution performs better than the most widely-used heavy-tailed distribution, the Student’s t distribution.

Keywords: GARCH model; fat tails; platinum spot returns (search for similar items in EconPapers)
JEL-codes: C22 C52 G17 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:seg:012016:v:2:y:2017:i:2:p:141-148

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