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Undergraduate Research Day UMT 2018<br />

Predict the Volatility of Gold Future Price using Time Series Models<br />

Nurfazlina Binti Mohamed<br />

Supervisor: Dr. Hanafi Bin A. Rahim<br />

Bachelor of Science (Financial Mathematics)<br />

School of Informatics and Applied Mathematics<br />

This study uses the GARCH, IGARCH and ARCH models to forecast volatility in gold future<br />

prices. At this time, gold is known as a safe place during uncertainties and economic<br />

crises as it is considered more stable than any other asset class. Subsequently, this study<br />

has used weekly data from 5 January 1997 to 31 December 2017 for 10 years to forecast<br />

the volatility of the gold price using the ARCH, GARCH and IGARCH models. The Lagrange<br />

Multiplier we used to test the ARCH effect in the return series. The researcher employ<br />

the ARCH (1), GARCH (1, 1), and IGARCH specifications (1, 1). The results of this study<br />

show that GARCH (1, 1) is a better model than ARCH (1) and IGARCH (1, 1) to forecast<br />

the volatility of gold future prices.

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