Author(s)

Nop Sopipan, Pairote Sattayatham, Bhusana Premanode

Institute of Biomedical Engineering, Imperial College South Kensington Campus, Kensington, London.
School of Mathematics Suranaree University of Technology, Nakhon Ratchasima, Thailand.

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.

Forecasting; Volatility; Gold Price; Markov Regime Switching

N. Sopipan, P. Sattayatham and B. Premanode, "Forecasting Volatility of Gold Price Using Markov Regime Switching and Trading Strategy," Journal of Mathematical Finance, Vol. 2 No. 1, 2012, pp. 121-131. doi: 10.4236/jmf.2012.21014.