A Boosting Approach to Forecasting the Volatility of Gold-Price Fluctuations Under Flexible Loss
41 Pages Posted: 23 Oct 2014 Last revised: 12 Nov 2015
Date Written: November 11, 2015
Abstract
We use a boosting approach to study the time-varying out-of-sample informational content of various financial and macroeconomic variables for forecasting the volatility of gold-price fluctuations. We use an out-of-sample R2 statistic to evaluate forecasts as a function of the shape of a forecaster’s loss function. We show that, when compared to an autoregressive benchmark forecast, those forecasters tend to benefit from using predictions implied by the boosting approach who encounter a larger loss when underestimating rather than overestimating the future volatility of gold-price fluctuations. We use a simulation experiment to study the significance of this benefit.
Keywords: Volatility of gold-price fluctuations; Real-time forecasting; Boosting approach
JEL Classification: C53, E44
Suggested Citation: Suggested Citation