A Study on the Asymmetric Volatility of Price Index of Gold and Crude Oil

Abstract

This study used daily indices of gold and crude oil prices from January 2, 1987 to June 28, 2019 to find out whether the impacts on the volatility of gold and crude oil prices are different according to type of information that arrive in each market. An empirical analysis was conducted using GJR(1,1)-MA(1) model. The analysis result showed that GJR(1,1)-MA(1) model is an specification model for analyzing asymmetrical response for the information. Volatility in gold and crude oil prices was shown to respond asymmetrically according to type of information. As for gold market before the global financial crisis, unpredictable, positive yield rate increased the volatility of gold price much more than unpredictable, negative yield rate. After the global financial crisis, however, unpredictable, negative yield rate was shown to increase volatility in gold price more than unpredictable, positive yield rate. On the other hand, in the crude oil market, unpredictable, negative yield rate increased the volatility in crude oil price more than unpredictable, positive yield rate both before and after the global financial prices.

Keywords—Gold Price, Crude Oil Price, Information, Asymmetrical Volatility, GJR model