Abstract:
We examine the predictive value of gold-to-silver and gold-to-platinum price ratios, as
proxies for global risks affecting the realized variance (RV) of oil-price movements, using monthly
data over the longest available periods of 1915:01–2021:03 and 1968:01–2021:03, respectively. Using
the two ratios, we find statistically significant evidence of in-sample predictability for increases in RV
for both ratios. This finding also translates into statistically significant out-of-sample forecasting gains
derived from these two ratios for RV. Given the importance of real-time forecasts of the volatility of
oil-price movements, our results have important implications for investors and policymakers.
