Return Volatility Spread in Commodity Volatility Indices: Spot and Future Market Research

Abstract

Volatility Indices are an important indicator for investors to accurately predict returns and risks in case of uncertainty in the markets. In this study, the effects of the gold, silver, and oil volatility indices (GVI, SVI and OVI) on the returns and volatility of both spot and futures assets were investigated using the VAR-EGARCH procedure. The findings of the study reveal that both the GVI and gold futures prices have a positive effect on gold spot prices. At the same time, it has been determined that gold futures prices are obtained from the GVI and gold spot prices. On the other hand, although SVI and future prices were effective on silver spot prices, only SVI lagged prices were effective on silver futures. Finally, OVI and oil future returns were ineffective on oil spot prices, and only OVI returns were effective on oil future prices.