EARTH

[21001-14-09] How macroeconomic factors influence volatility of metal prices?

○WENHUA LI¹, TSUYOSHI ADACHI¹ (1. Akita University)

Chairman：Somsak Saisinchai （Chulalongkorn University）, Carlito Tabelin (Hokkaido University)

Keywords:metal price volatility, low frequency volatility, Spline GARCH, macroeconomic factors

Studies on price volatility has been intensively discussed. Even though macroeconomic environment is thought to be important in the evolvement of price volatility, rare evidence is quantified. In addition, price volatility of metals attracted people’s attention recently for it is going high. Therefore, the study focus on analyzing macroeconomic variables that dominant metal price volatility evolvement. To improve the significance of regression, we adopt Spline-GARCH model to generate low-frequency price volatility instead of directly using realized volatility. The study considers nine kinds of metals’ volatility respectively, finds significant variables dominating their low frequency volatility at annual level, and tests the robustness of in-sample consistency of regressions and out of sample forecasting ability of the macroeconomic variables. In addition, we try to give economic explanation on the relation of explanatory variables to volatility. The results show that unemployment rate, inflation, ted spread, S&P 500 index, and exchange rate are significant factors. The study also approves that regression are more robust by using low frequency volatility in general.