Asymmetric volatility response to news sentiment in gold futures

Lee Smales

Journal of International Financial Markets, Institutions and Money, 2015, vol. 34, issue C, 161-172

Abstract: This paper seeks to consider the relationship between the sentiment of newswire messages and the volatility of returns in the gold futures market. In particular, answers are sought to two key questions: firstly, how is the volatility of returns in the gold futures market influenced by the sentiment of non-scheduled news events? Secondly, is this news–volatility relationship affected by the state of the business cycle? The empirical evidence points to the sentiment of newswire messages having a significant asymmetrical impact on volatility such that negative news has a significantly greater impact on volatility than does positive news. There is evidence to suggest that participants in the gold futures market initially over-react to newswire messages and this is subsequently reversed. The recessionary environment of Q4 2007–Q2 2009, serves to greatly increase the volatility response to newswire messages.

Keywords: Gold; Trading behaviour; News sentiment; Volatility; Asymmetric response (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (29)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:34:y:2015:i:c:p:161-172

DOI: 10.1016/j.intfin.2014.11.001

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