Dynamic relationship between precious metals
Author(s)
Date
2013Source Title
Resources Policy
Print ISSN
0301-4207
Volume
38
Issue
4
Pages
504 - 511
Language
English
Type
ArticleItem Usage Stats
208
views
views
665
downloads
downloads
Abstract
We use a relatively new approach to endogenously detect the volatility shifts in the returns of four major precious metals (gold, silver, platinum and palladium) from 1999 to 2013. We reveal that the turbulent year of 2008 has no significant effect on volatility levels of gold and silver however causes an upward shift in the volatility levels of palladium and platinum. Using the consistent dynamic conditional correlations, we show that precious metals get strongly correlated with each other in the last decade which reduces the diversification benefits across them and indicates a convergence to a single asset class. We endogenously detect the shifts in these dynamic correlation levels and reveal uni-directional volatility shift contagions among precious metals. The results show that gold has a uni-directional volatility shift contagion effect on all other precious metals and silver has a similar effect on platinum and palladium. However, the latter two do not matter in terms of volatility shift contagion. Thus, investors that hedge with precious metals should, in particular, monitor the volatility levels of gold and silver. © 2013 Elsevier Ltd.
Keywords
Consistent dynamic conditional correlationDynamic equicorrelation
Penalized contrast function
Precious metals
Volatility shift contagion
Contagion effects
Dynamic conditional correlations
Dynamic correlation
Gold and silver
New approaches
Penalized contrast
Platinum and palladiums
Volatility shift contagion
Platinum
Precious metals
Silver
Gold
convergence
dynamic analysis
gold
metal
palladium
platinum
silver
source rock
Permalink
http://hdl.handle.net/11693/26720Published Version (Please cite this version)
http://dx.doi.org/10.1016/j.resourpol.2013.08.004Collections
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