Forecasting Gold Returns Volatility Over 1258-2023: The Role of Moments

Thanoj K. Muddana (), Komal S.R. Bhimireddy (), Anandamayee Majumdar and Rangan Gupta
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Thanoj K. Muddana: Department of Mathematics, San Francisco State University, California, USA
Komal S.R. Bhimireddy: Department of Mathematics, San Francisco State University, California, USA

No 202421, Working Papers from University of Pretoria, Department of Economics

Abstract: We analyze the role of leverage, lower and upper tail risks, skewness and kurtosis of real gold returns in forecasting its volatility of over the annual data sample of 1258 to 2023. To conduct our forecasting experiment, we first fit Bayesian time-varying parameters quantile regressions to real gold returns, under six alternative prior settings, to obtain the estimates of volatility (as inter-quantile range), lower and upper tail risks, skewness and kurtosis. Second, we forecast the derived estimates of conditional volatility using the information contained in leverage of gold returns, tail risks, skewness and kurtosis using recursively estimated linear predictive regressions over the out-of-sample periods. We find strong statistical evidence of the role of the moments-based predictors in forecasting gold returns volatility over the short- to medium term, i.e., till one- to five-year ahead, when compared to the autoregressive benchmark. Our results have important implications for investors and policymakers.

Keywords: Time-varying parameters quantile regressions, Bayesian inference; Real gold returns, Moments, Volatility forecasting, Linear predictive regressions (search for similar items in EconPapers)
JEL-codes: C22 C53 Q02 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2024-05
New Economics Papers: this item is included in nep-rmg
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