Volatility Persistence and Asymmetry Under the Microscope: The Role of Information Demand for Gold and Oil

Abstract

This study explores the relationship between Google search activity and the conditional volatility of oil and gold spot market returns. By aggregating the volume of queries related to the two commodity markets in the spirit of Da et al. (2015), we construct a weekly Searching Volume Index (SVI) for each market as proxy of households and investors information demand. We employ a rolling EGARCH framework to reveal how the significance of information demand has evolved through time. We find that higher information demand increases conditional volatility in gold and oil spot market returns. Information flows from Google SVIs reduce the proportion of the significant volatility asymmetry produced by negative shocks in both commodity markets. The latter is more profound in the gold market.