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      Dynamic relationship between precious metals

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      Author(s)
      Sensoy, A.
      Date
      2013
      Source Title
      Resources Policy
      Print ISSN
      0301-4207
      Volume
      38
      Issue
      4
      Pages
      504 - 511
      Language
      English
      Type
      Article
      Item Usage Stats
      208
      views
      665
      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 correlation
      Dynamic 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/11693/26720
      Published Version (Please cite this version)
      http://dx.doi.org/10.1016/j.resourpol.2013.08.004
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      • Department of Mathematics 688
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