Investigating seasonality, policy intervention and forecasting in the Indian gold futures market: a comparison based on modeling non-constant variance using two different methods

Rupel Nargunam (), William W. S. Wei and N. Anuradha
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Rupel Nargunam: Temple University
William W. S. Wei: Temple University
N. Anuradha: B.S. Abdur Rahman Crescent Institute of Science and Technology

Financial Innovation, 2021, vol. 7, issue 1, 1-15

Abstract: Abstract This study focuses on the Indian gold futures market where primary participants hold sentimental value for the underlying asset and are globally ranked number two in terms of the largest private holdings in the physical form. The trade of gold futures relates to seasons, festivity, and government policy. So, the paper will discuss seasonality and intervention in the analysis. Due to non-constant variance, we will also use the standard variance stabilization transformation method and the ARIMA/GARCH modelling method to compare the forecast performance on the gold futures prices. The results from the analysis show that while the standard variance transformation method may provide better point forecast values, the ARIMA/GARCH modelling method provides much shorter forecast intervals. The empirical results of this study which rationalise the effect of seasonality in the Indian bullion derivative market have not been reported in literature.

Keywords: Gold futures prices; ARIMA models; Non-constant variance; ARCH and GARCH models; Box–Cox power transformation; Forecast errors (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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DOI: 10.1186/s40854-021-00283-9

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