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Estimation and Analysis of the Hurst Exponent in Gold Futures During Periods of High Geopolitical Volatility (2022-2025)
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Abstract
The study analyzes the dynamics of gold futures returns during periods of high geopolitical volatility, using the Hurst exponent to assess the presence of persistence or antipersistence in the time series. Four different periods were examined, considering the impact of the Gaza war initiated in October 2023. The results show that before the conflict the Hurst exponent values indicated higher persistence in returns, while after the onset of the war, the values tend to decrease, reflecting more random behavior and less predictability in the market.
The comparative analysis between the different methods of estimating the Hurst exponent highlights that the corrected R/S and corrected empirical methods provide more robust and reliable estimates compared to the simple methods. These results are consistent with previous studies suggesting that long-term memory in financial markets is sensitive to external events and may change over time. To complement the analysis, an ARFIMA-GARCH model was implemented, which allowed capturing both the long-term memory in the mean returns and the conditional volatility.
The forecasts obtained with this model indicate that the future volatility of the gold market tends to stabilize in the short term, with no expectations of abrupt fluctuations. This implies that, although returns may show some time dependence, global uncertainty and geopolitical events may modify their behavior. The combination of fractal analysis and advanced econometric models provides a better understanding of market dynamics and their implications for financial decision making. This research is considered to be original and has the potential to contribute to informed decision making and improved investor experience.
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