Application of Grey Theory in Forecasting Gold Price
Date Issued
2014
Date
2014
Author(s)
Chen, Yen-Ling
Abstract
Since ancient times, gold has always been everyone ''s favorite metal; especially with the stability of value against fluctuation, durability against most corrosive compounds, plus it is also a way to hedge against inflation. In addition to making decorations, gold is mainly used in electronic components, semiconductor industry, dentistry and engineering. Possessing gold is also a way to display an individual''s social status and wealth.
When investors are facing instability in general financial markets, the gold market provides a choice of risk diversification, where they are able to do hedging or speculation. Observation shows that the price of gold rises as the US dollar depreciates, or as the oil prices rise, and when inflation occurs. In recent years, a substantial increase of market demand for gold shows that gold has become one of the most important financial instruments. Since it’s a special article with natures of both currency and precious metal, the shape of market demand for gold has changed and transforms gold from a mere physical item into an important tool for investment.
This study focuses on predicting the future trend of gold price, which is mostly affected by the market supply and demand itself. It applied the theory of grey GM (1,1) as a construction prediction model. Research is based on the historical data from World Gold Council (WGC), 2006. which includes the average gold price during a sampling period from 1993 to 2012. I reserve data ranging from 2010 to 2012 to conduct out-of-sample forecast。
I take the GM (1,1) prediction model to test the accuracy of the prediction, and use Mean Absolute Percentage Error (MAPE) test to prove its ability to forecast. The study found that, the MAPE values ranged between 10% and 20 % or less, thereby concluding that the GM (1,1) model has a good predictive ability for gold price.
Subjects
灰色理論
黃金價格
灰預測
GM(1,1)模型
灰關聯分析
金價預測
Type
thesis
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