TITLE:
Forecasting Volatility of Gold Price Using Markov Regime Switching and Trading Strategy
AUTHORS:
Nop Sopipan, Pairote Sattayatham, Bhusana Premanode
KEYWORDS:
Forecasting; Volatility; Gold Price; Markov Regime Switching
JOURNAL NAME:
Journal of Mathematical Finance,
Vol.2 No.1,
February
28,
2012
ABSTRACT: In this paper, we forecast the volatility of gold prices using Markov Regime Switching GARCH (MRS-GARCH) models. These models allow volatility to have different dynamics according to unobserved regime variables. The main purpose of this paper is to find out whether MRS-GARCH models are an improvement on the GARCH type models in terms of modeling and forecasting gold price volatility. The MRS-GARCH is best performance model for gold price volatility in some loss function. Moreover, we forecast closing prices of gold price to trade future contract. MRS-GARCH got the most cumulative return same GJR model.