Do Higher Asymmetry Threshold Effects Exist on the Gold Return Volatility during Highly Fluctuating Periods?

Yu-Hui Liao,Yeong-Jia Goo

doi:10.3390/su11184829

Abstract

The GJR-GARCH model is frequently used by researchers and academic institutions. However, the model conveys limited information, using zero as a threshold without considering other possible thresholds. This study shows that a favorable econometric model could be formed by constructing a hybrid momentum HMTAR-GARCH model. Our findings indicate that higher asymmetry momentum threshold effects exist on the gold return volatility during highly fluctuating periods. Sustainable Enterprise Resource Planning (S-ERP) systems could help in the formation of a good risk management strategy by using the HMTAR-GARCH model. Perhaps gold is more sustainable than many other financial assets in the creation of an investment portfolio.

Highlights

Gold is an underlying asset in which volatility is an important factor for option pricing
The contribution of this paper is its combination of threshold autoregressive (TAR), MTAR, and GARCH for gold return volatility forecasting
The gold return volatility was found to be greater during the financial tsunami period than non-financial tsunami period

Summary

Introduction

Gold is an underlying asset in which volatility is an important factor for option pricing. The issue of gold return volatility has been empirically discussed. There have been many insightful investigations published previously that use various sorts of econometric models to study the gold return volatility and the asymmetric effect of positive and negative shocks [1,2,3,4,5]. It has value in helping investors to spot reputational risk threat and offset such a risk in advance. It is an economic moat helping investors to identify what makes a company sustainable in the financial sense, leading to strong brands and healthy end-markets. Investors should definitely consider the target of sustainable investing, ethical investing, or socially responsible investing [6,7,8]

Methods

Results

Conclusion