Precious metals-exchange rate volatility transmissions and hedging strategies
AbstractThis study examines the conditional volatility and correlation dependency and interdependency for the four major precious metals (i.e., gold, silver, platinum and palladium), while accounting for geopolitics within a multivariate system. The implications of the estimated results for portfolio designs and hedging strategies are also analyzed. The results for the four metals system show significant short-run and long-run dependencies and interdependencies to news and past volatility. Furthermore, these results become more pervasive when the exchange rate and federal funds rate are included. Monetary policy also has a differential impact on the precious metals and the exchange rate volatilities. Finally, the applications of the results show the optimal weights in a two-asset portfolio and the hedging ratios for long positions.
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Bibliographic InfoArticle provided by Elsevier in its journal International Review of Economics & Finance.
Volume (Year): 19 (2010)
Issue (Month): 4 (October)
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Web page: http://www.elsevier.com/locate/inca/620165
Shocks Volatility Correlation Dependency and interdependency;
Other versions of this item:
- Shawkat Hammoudeh & Yuan Yuan & Michael McAleer & Mark A. Thompson, 2009. "Precious Metals-Exchange Rate Volatility Transmissions and Hedging Strategies," CARF F-Series CARF-F-187, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
- Shawkat Hammoudeh & Yuan Yuan & Michael McAleer & Mark A. Thompson, 2009. "Precious Metals-Exchange Rate Volatility Transmissions and Hedging Strategies," CIRJE F-Series CIRJE-F-684, CIRJE, Faculty of Economics, University of Tokyo.
- Hammoudeh, S.M. & Yuan, Y. & McAleer, M.J. & Thompson, M.A., 2009. "Precious Metals-Exchange Rate Volatility Transmissions and Hedging Strategies," Econometric Institute Research Papers EI 2009-38, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
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