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Econometrics of Risk pp 203–218Cite as

Asymmetric Volatility of Local Gold Prices in Malaysia

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Part of the book series: Studies in Computational Intelligence ((SCI,volume 583))

Abstract

This study investigates the volatility of local gold prices in Malaysia using daily data over the period of July 2001–May 2014. Specifically, this paper analyzes the asymmetric reaction of gold in different weights to negative and positive news on average at all times as well as during extreme decreases in stock market. The former provides potential evidence for hedge, while the latter tests for the existence of a safe haven characteristic. We find that the local gold returns demonstrate an inverted asymmetric reaction to positive and negative innovations respectively. Positive shock increases the gold returns volatility more than the negative shock in full sample as well as the stock market downside, thus supporting the hedge and safe haven properties of gold investment in Malaysia.

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Notes

  1. 1.

    The severity of the shock is taken into account by looking at a range of lower quantiles of stock returns. The choice of the quantiles is arbitrary to some degree. Nevertheless, these quantiles have also been analyzed in other studies, such as [3, 10, 21].

  2. 2.

    Source: Central Bank of Malaysia.

  3. 3.

    Since all variables in the denominator of the calculation are negative in 2.5 % quantile, the ratio will not make sense. Therefore, we ignore the coefficient of variation for 5 % threshold.

  4. 4.

    [24] opine that industrial metal is more cyclical and has relatively lower volatility persistence than gold. This is because of its lower transitory persistence partly due to the stronger impact of the short lived shocks on it.

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Acknowledgments

The authors would like to acknowledge the Fundamental Research Grant Scheme 203/PSOSIAL/6711417 by Ministry of Education Malaysia and Universiti Sains Malaysia.

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Authors and Affiliations

  1. Labuan Faculty of International Finance, Universiti Malaysia Sabah, 87000, Federal Territory Labuan, Malaysia

    Mohd Fahmi Ghazali

  2. Economics Program, School of Social Sciences, Universiti Sains Malaysia, 11800 USM, Penang, Malaysia

    Mohd Fahmi Ghazali & Hooi Hooi Lean

Authors
  1. Mohd Fahmi Ghazali
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  2. Hooi Hooi Lean
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Correspondence to Hooi Hooi Lean .

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Editors and Affiliations

  1. Japan Advanced Institute of Science and Technology, Nomi, Japan

    Van-Nam Huynh

  2. Department of Computer Science, University of Texas at El Paso, El Paso, Texas, USA

    Vladik Kreinovich

  3. Faculty of Economics, Chiang Mai University, Chiang Mai, Thailand

    Songsak Sriboonchitta

  4. Faculty of Economics, Chiang Mai University, Chiang Mai, Thailand

    Komsan Suriya

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Ghazali, M.F., Lean, H.H. (2015). Asymmetric Volatility of Local Gold Prices in Malaysia. In: Huynh, VN., Kreinovich, V., Sriboonchitta, S., Suriya, K. (eds) Econometrics of Risk. Studies in Computational Intelligence, vol 583. Springer, Cham. https://doi.org/10.1007/978-3-319-13449-9_14

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  • DOI: https://doi.org/10.1007/978-3-319-13449-9_14

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