Global economic policy uncertainty and gold futures market volatility: Evidence from Markov regime‐switching GARCH‐MIDAS models

Feng Ma, Xinjie Lu, Lu Wang and Julien Chevallier
Additional contact information
Julien Chevallier: LED - Laboratoire d'Economie Dionysien - UP8 - Université Paris 8 Vincennes-Saint-Denis

Post-Print from HAL

Abstract: Abstract This paper explores the effects of global economic policy uncertainty (GEPU) on conditional volatility in the gold futures market using Markov regime‐switching GARCH‐MIDAS models. The in‐sample empirical results suggest that GEPU indeed contains predictive information for the gold futures market, and higher GEPU leads to higher volatility within the gold futures market. Moreover, the novel model, which adds Markov regime switching with time‐varying transition probabilities and the GEPU index, achieves relatively better performance than those of the other competing models from a statistical point of view. Furthermore, we discuss the asymmetric effects of different changes in GEPU on the gold futures market and the models' performances with different horizons, and we find that our new model has better predictive performance under negative changes in GEPU than under positive changes in GEPU. Further discussion also confirms that our previous findings are robust during two special cases, the global financial crisis and European debt crisis, during which the market suffered from fierce fluctuations and was fraught with considerable uncertainty.

Date: 2021-09
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Published in Journal of Forecasting, 2021, 40 (6), pp.1070-1085. ⟨10.1002/for.2753⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-04250272

DOI: 10.1002/for.2753

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().