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The macroeconomic determinants of volatility in precious metals markets

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  • Batten, Jonathan A.
  • Ciner, Cetin
  • Lucey, Brian M.

Abstract

This paper models the monthly price volatilities of four precious metals (gold, silver, platinum and palladium prices) and investigates the macroeconomic determinants (business cycle, monetary environment and financial market sentiment) of these volatilities. Gold volatility is shown to be explained by monetary variables, but this is not true for silver. Overall, there is limited evidence that the same macroeconomic factors jointly influence the volatility processes of the four precious metal price series, although there is evidence of volatility feedback between the precious metals. These results are consistent with the view that precious metals are too distinct to be considered a single asset class, or represented by a single index. This finding is of importance for portfolio managers and investors.

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Bibliographic Info

Article provided by Elsevier in its journal Resources Policy.

Volume (Year): 35 (2010)
Issue (Month): 2 (June)
Pages: 65-71
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Handle: RePEc:eee:jrpoli:v:35:y:2010:i:2:p:65-71

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Web page: http://www.elsevier.com/locate/inca/30467

For corrections or technical questions regarding this item, or to correct its listing, contact: (Jeroen Loos).

Related research

Keywords: Commodity prices Gold Macroeconomic factors Silver Volatility;

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References

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  1. Racine, Jeffrey, 2001. "On the Nonlinear Predictability of Stock Returns Using Financial and Economic Variables," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(3), pages 380-82, July.
  2. Claude B. Erb & Campbell R. Harvey, 2005. "The Tactical and Strategic Value of Commodity Futures," NBER Working Papers 11222, National Bureau of Economic Research, Inc.
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  4. Chen, Nai-Fu, 1991. " Financial Investment Opportunities and the Macroeconomy," Journal of Finance, American Finance Association, vol. 46(2), pages 529-54, June.
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  7. Mark J. Flannery & Aris A. Protopapadakis, 2002. "Macroeconomic Factors Do Influence Aggregate Stock Returns," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 15(3), pages 751-782.
  8. Kearney, Colm, 2000. "The determination and international transmission of stock market volatility," Global Finance Journal, Elsevier, vol. 11(1-2), pages 31-52.
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Cited by:
  1. David Matesanz Gomez & Guillermo J. Ortega & Benno Torgler & German Dabat, 2011. "Co-movements in commodity prices: A note based on network analysis," CREMA Working Paper Series 2011-21, Center for Research in Economics, Management and the Arts (CREMA).

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