Forecasting volatility and correlation between oil and gold prices using a novel multivariate GAS model
Rongda Chen and
Energy Economics, 2019, vol. 78, issue C, 379-391
Forecasting the volatility and correlation among different kinds of assets has important applications in areas such as risk management, options pricing, and asset allocation. This paper mainly uses a novel multivariate Generalized Autoregressive Score (GAS) model to analyze and forecast volatilities and correlations between Brent, WTI and gold prices. The time-varying parameters of multivariate GAS model for a given distribution of crude oil and gold prices is observed which is supported by Doornik-Hansen test. The testing results of time-varying parameters based on LRT statistics reveal that the dependent structure between Brent and gold prices is more complex than those of WTI and gold. The estimation results show that the multivariate GAS method well captures the volatility persistence and nonlinear interaction effects between the crude oil and gold markets. In addition, we compare the forecasting performance of the GAS with the classical Dynamic Conditional Correlation Generalized Auto-Regressive Conditional Heteroskedasticity (DCC-GARCH) model, and find that the forecasting power of volatility and correlation in multivariate GAS model is better than the DCC-GARCH model.
Keywords: Forecasting; Oil price; Gold price; Volatility and correlation; Multivariate GAS model; DCC-GARCH model (search for similar items in EconPapers)
JEL-codes: C22 C52 C53 Q47 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:78:y:2019:i:c:p:379-391
Access Statistics for this article
Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant
More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().