Nonlinear Dynamics of International Gold Prices: Conditional Heteroskedasticity or Chaos?

Huang Xiaowei (), Yu Mei () and Ban Chengwei ()
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Huang Xiaowei: The School of Banking and Finance, University of International Business and Economics, Beijing100029, China
Yu Mei: The School of Banking and Finance, University of International Business and Economics, Beijing100029, China
Ban Chengwei: Guanghua School of Management, Peking University, Beijing100871, China

Journal of Systems Science and Information, 2014, vol. 2, issue 5, 411-427

Abstract: Taking the special nonlinear characteristics of the domestic and international gold price into account, this paper systematically analyzed its nonlinearity by the methods of BDS test, R/S analysis and improved largest Lyapunov exponent. We find three main results: (1) ARMA-GARCH model could adequately explain the linear and nonlinear dependence of gold price series; (2) long-memory does not exist anymore in price series explained by ARMA-GARCH model; (3) chaos phenomenon which is sensitive to the initial value does not exist either in the residuals of regression model. Therefore, we believe that the nonlinearity of gold price is mainly characterized in conditional heteroscedasticity rather than chaos.

Keywords: heteroscedasticity; chaos; BDS test; R/S analysis; Lyapunov exponent (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:bpj:jossai:v:2:y:2014:i:5:p:411-427:n:3

DOI: 10.1515/JSSI-2014-0411

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