Forecasting Volatility of Gold Price Using Markov Regime Switching and Trading Strategy


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.

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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.

Conflicts of Interest

The authors declare no conflicts of interest.


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