Jump to ContentJump to Main Navigation
Show Summary Details

Studies in Nonlinear Dynamics & Econometrics

Ed. by Mizrach, Bruce

5 Issues per year


IMPACT FACTOR increased in 2015: 0.517
5-year IMPACT FACTOR: 0.628

SCImago Journal Rank (SJR) 2015: 0.426
Source Normalized Impact per Paper (SNIP) 2015: 0.546
Impact per Publication (IPP) 2015: 0.419

Mathematical Citation Quotient (MCQ) 2015: 0.01

Online
ISSN
1558-3708
See all formats and pricing
Volume 20, Issue 5 (Dec 2016)

Issues

The place of gold in the cross-market dependencies

Sofiane Aboura
  • Université de Paris XIII, Sorbonne Paris Cité, CEPN (UMR-CNRS 7234), 93430 Villetaneuse, France
/ Julien Chevallier
  • Corresponding author
  • IPAG Business School (IPAG Lab), 184 Boulevard Saint-Germain, 75006 Paris, France
  • Université Paris 8 (LED), 2 rue de la Liberté, 93526 Saint Denis Cedex, France
  • Email:
/ Rania Jammazi
  • IPAG business School, France and University of Management Sciences and Economics of Sousse, Erriadh City, Tunisia
/ Aviral Kumar Tiwari
  • Faculty of Management Studies, ICFAI University Tripura, India
Published Online: 2016-03-25 | DOI: https://doi.org/10.1515/snde-2015-0017

Abstract

This paper investigates the inter-relationships between the gold price on the one hand, other precious metals (e.g. silver, palladium, platinum) and asset markets (e.g. stocks, bonds, crude oil) on the other hand. The econometric methodology relies on the Markov-switching BEKK model by Haas and Mittnik (2008) that captures time-varying correlations and bull-bear regimes for bivariate specifications. The model is applied to daily data from 1988 to 2013. The main results indicate that gold’s influence, through return and/or volatility spillovers, seems almost intact whatever the economic regime. Robustness checks of the statement that gold occupies a special place among commodities are provided under the form of a multi-asset portfolio management exercise.

This article offers supplementary material which is provided at the end of the article.

Keywords: BEKK; commodities; financial markets; gold; markov-switching; multi-asset portfolio management

JEL Classification: L61; C34; C58; E44; G15

References

  • Adrangi, B., A. Chatrath, and D. R. Christie. 2000. “Price Discovery in Strategically-Linked Markets: The Case of the Gold-Silver Spread.” Applied Financial Economics 10: 227–234.

  • Aggarwal, R., and B. M. Lucey. 2007. “Psychological Barriers in Gold Prices?” Review of Financial Economics 16: 217–230.

  • Aruga, K., and S. Managi. 2011. “Testing the International Linkage in the Platinum-Group Metal Futures Markets.” Resources Policy 36: 339–345.

  • Baba, Y., R. F. Engle, D. F. Kraft, and K. F. Kroner. 1991. “Multivariate Simultaneous Generalized ARCH.” unpublished, http://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.27.1240.

  • Bampinas, G., and T. Panagiotidis. 2015. “On the Relationship between Oil and Gold before and after Financial Crisis: Linear, Nonlinear and Time-Varying Causality Testing.” Studies in Nonlinear Dynamics & Econometrics 19: 657–668.

  • Baur, D. 2011. “Explanatory Mining for Gold: Contrasting Evidence from Simple and Multiple Regressions.” Resources Policy 36: 265–275.

  • Baur, D. 2013. “The Autumn Effect of Gold.” Research in International Business and Finance 27: 1–11.

  • Baur, D., and T. K. McDermott. 2010. “Is Gold a Safe Haven? International Evidence.” Journal of Banking and Finance 34: 1886–1898.

  • Baur, D., and B. Lucey. 2010. “Is Gold a Hedge or a Safe Haven? An Analysis of Stocks, Bonds and Gold.” The Financial Review 45: 217–229.

  • Baur, D., and K. J. Glover. 2014. “Heterogeneous Expectations in the Gold Market: Specification and Estimation.” Journal of Economic Dynamics and Control 40: 116–133.

  • Bessler, W., and D. Wolff. 2015. “Do Commodities Add Value in Multi-Asset Portfolios? An Out-of-Sample Analysis for Different Investment Strategies.” Journal of Banking and Finance 60: 1–20.

  • Blose, L. E. 2010. “Gold Prices, Cost of Carry, and Expected Inflation.” Journal of Economics and Business 62: 35–47.

  • Bollerslev, T., R. Engle, and M. Wooldridge. 1988. “A Capital Asset Pricing Model with Time-Varying Covariances.” Journal of Political Economy 96: 116–131.

  • Cai, J. 1994. “A Markov Model of Unconditional Variance in ARCH.” Journal of Business and Economic Statistics 12: 309–316.

  • Chan K. F., S. Treepongkaruna, R. Brooks, and S. Gray. 2011. “Asset Market Linkages: Evidence from Financial, Commodity and Real Estate Assets.” Journal of Banking and Finance 35: 1415–1426.

  • Chng, M. T. 2009. “Economic Linkages across Commodity Futures: Hedging and Trading Implications.” Journal of Banking and Finance 33: 958–970.

  • Chow, G. C. 1960. “Tests of Equality between Sets of Coefficients in Two Linear Regressions.” Econometrica 28: 591–605.

  • Chua, J., G. Stick, and R. Woodward. 1990. “Diversifying with Gold Stocks.” Financial Analysts Journal 46: 76–79.

  • Ciner, C. 2001. “On the Long run Relationship between Gold and Silver: A Note.” Global Finance Journal 12: 299–303.

  • Davidson, S., R. Faff, and D. Hillier. 2003. “Gold Factor Exposures in International Asset Pricing.” Journal of International Financial Markets, Institutions and Money 13: 271–289.

  • Ding, Z., and R. Engle. 2001. “Large Scale Conditional Covariance Modeling, Estimation and Testing.” Academia Economic Papers 29: 157–184.

  • Dooley, M. P., P. Isard, and M. P. Taylor. 1995. “Exchange Rates, Country-Specific Shocks and Gold.” Applied Financial Economics 5: 121–129.

  • Engle, R. 2004. “Risk and Volatility: Econometric Models and Financial Practice.” American Economic Review 94: 405–420.

  • Engle, R., and F. K. Kroner. 1995. “Multivariate Simultaneous Generalized ARCH.” Econometric Theory 11: 122–150.

  • Faff, R., and H. Chan. 1998. “A Multifactor Model of Gold Industry Stock Returns: Evidence from the Australian Equity Market.” Applied Financial Economics 8: 21–28.

  • Ghosh, D., E. J. Levin, P., MacMillan, and R. E. Wright. 2002. “Gold as an Inflation Hedge?” WorkingPaper, University of Stirling, UK.

  • Gray, S. F. 1996. “Modeling the Conditional Distribution of Interest Rates as a Regime-Switching Process.” Journal of Financial Economics 42: 27–62.

  • Haas, M., and S. Mittnik. 2008. “Multivariate Regime Switching GARCH with an Application to International Stock Markets.” unpublished, http://www.ifkcfs.de/fileadmin/downloads/publications/wp/08_08.pdf.

  • Haas, M., S. Mittnik, and M. S. Paolella. 2004. “A New Approach to Markov-Switching GARCH Models.” Journal of Financial Econometrics 2: 493–530.

  • Hamilton, J. D. 1989a. “A New Approach to the Economic Analysis of Non-Stationary Time Series and the Business Cycle.” Econometrica 57: 357–384.

  • Hamilton, J. D. 1989b. “Rational-Expectations Econometric Analysis of Changes in Regime.” Journal of Economic Dynamics and Control 12: 385–423.

  • Hamilton, J. D., and R. Susmel. 1994. “Autoregressive Conditional Heteroskedasticity and Changes in Regime.” Journal of Econometrics 64: 307–333.

  • Hood, M., and F. Malik. 2013. “Is Gold the Best Hedge and a Safe Haven under Changing Stock Market Volatility?” Review of Financial Economics 22: 47–52.

  • Kasch, M., and M. Caporin. 2013. “Volatility Threshold Dynamic Conditional Correlations: An International Analysis.” Journal of Financial Econometrics 11: 706–742.

  • Kearney, A. A., and R. E. Lombra. 2009. “Gold and Platinum: Toward Solving the Price Puzzle.” Quarterly Review of Economics and Finance 49: 884–892.

  • Koutsoyiannis, A. 1983. “A Short-Run Pricing Model for a Speculative Asset, Tested with Data from the Gold Bullion Market.” Applied Economics 15: 563–581.

  • Lee, H. T., and J. K. Yoder. 2007. “A Bivariate Markov Regime Switching GARCH Approach to Estimate the Time Varying Minimum Variance Hedge Ratio.” Applied Economics 39: 253–265.

  • Lucey, B. M., and E. Tully. 2006a. “Seasonally, Risk and Return in Daily Comex Gold and Silver Data 1982–2002.” Applied Financial Economics 16: 319–333.

  • Lucey, B. M., and E. Tully. 2006b. “The Evolving Relationship between Gold and Silver 1978–2002: Evidence from a Dynamic Cointegration Analysis – a Note. Applied Financial Economics Letters 2: 47–53.

  • Markowitz, H. 1952. “Portfolio Selection.” Journal of Finance, 7 (1): 77–91. [Web of Science]

  • Mahdavi, S., and S. Zhou. 1997. “Gold and Commodity Prices as Leading Indicators of Inflation: Tests of Long-Run Relationship and Predictive Performance.” Journal of Economics and Business 49: 475–489.

  • Maheu, J. M., T. H. McCurdy, and Y. Song 2012. “Components of Bull and Bear Markets: Bull Corrections and Bear Rallies.” Journal of Business and Economic Statistics 30: 391–403.

  • Mensi, W., M., Beljid, A. Boubaker, and S. Managi. 2013. “Correlations and Volatility Spillovers across Commodity and Stock Markets: Linking Energies, Food and Gold.” Economic Modelling 32: 15–22.

  • Mills, T. C. 2004. “Statistical Analysis of Daily Gold Price Data.” Physica A: Statistical Mechanics and its Applications 338: 559–566.

  • Shafiee, S., and E. Topal. 2010. “An Overview of Global Gold Market and Gold Price Forecasting.” Resources Policy 35: 178–189.

  • Sherman, E. 1982. “Gold: A Conservative, Prudent Diversifier.” Journal of Portfolio Management 8: 21–27.

  • Tang, K., and W. Xiong. 2012. “Index Investment and Financialization of Commodities.” Financial Analysts Journal 68: 54–74.

About the article

Corresponding author: Julien Chevallier, IPAG Business School (IPAG Lab), 184 Boulevard Saint-Germain, 75006 Paris, France, Phone: +33 (0)1 49 40 73 86, Fax: +33 (0)1 49 40 72 55, e-mail: ; and Université Paris 8 (LED), 2 rue de la Liberté, 93526 Saint Denis Cedex, France


Published Online: 2016-03-25

Published in Print: 2016-12-01


Citation Information: Studies in Nonlinear Dynamics & Econometrics, ISSN (Online) 1558-3708, ISSN (Print) 1081-1826, DOI: https://doi.org/10.1515/snde-2015-0017. Export Citation

Supplementary Article Materials

Comments (0)

Please log in or register to comment.
Log in