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Re-examining the real option characteristics of gold for gold mining companies

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  • Shahzad, Syed Jawad Hussain
  • Rahman, Md Lutfur
  • Lucey, Brian M.
  • Uddin, Gazi Salah

Abstract

This paper re-examines the static and time-varying asymmetries in quantile-specific relationship between gold returns and gold mining companies' stock returns. In doing so, we use novel cross-quantilogram approach that is built on quantiles of both distributions and control for the effect of crude oil price changes, overall stock market movements, stock market volatility and economic policy uncertainty. We find that the gold returns negatively predict the gold stock returns around the median quantile. Whereas the gold returns positively depend on the gold mining companies’ stock returns in the low and high quantiles. We therefore, support for an embedded real option in gold for gold mining companies which is time-varying and occurs in very short-run. This finding is useful for devising portfolio allocation and diversification strategies.

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  • Shahzad, Syed Jawad Hussain & Rahman, Md Lutfur & Lucey, Brian M. & Uddin, Gazi Salah, 2021. "Re-examining the real option characteristics of gold for gold mining companies," Resources Policy, Elsevier, vol. 70(C).
    • Handle: RePEc:eee:jrpoli:v:70:y:2021:i:c:s0301420720309211
    DOI: 10.1016/j.resourpol.2020.101890
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    More about this item

    Keywords

    Gold price; Gold mining stock price; Asymmetric relation; Cross-quantilogram; Rolling estimation;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market
    • L61 - Industrial Organization - - Industry Studies: Manufacturing - - - Metals and Metal Products; Cement; Glass; Ceramics

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