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Conditional Dependence Structure in the Precious Metals Futures Market

Author

Listed:
  • Ma?gorzata Just

    (Pozna? University of Life Sciences, Faculty of Economics and Social Sciences)

  • Agnieszka Kozera

    (Pozna? University of Life Sciences, Faculty of Economics and Social Sciences)

  • Aleksandra ?uczak

    (Pozna? University of Life Sciences, Faculty of Economics and Social Sciences)

Abstract

The purpose of this paper was to assess the conditional dependence structure in the precious metals futures market in the period spanning from the beginning of 2000 to mid 2018. These time frames correspond to large fluctuations of quoted contract prices during the financial crisis. The dynamic Kendall?s tau coefficients and the dynamic tail dependence coefficients were used to assess the strength and dynamics of the nexus between rates of return on quoted prices of precious metals futures contracts. The coefficients were determined using the copula-based multivariate GARCH models, whereas the daily changes in the conditional dependence structure (changes in market state) were identified with the fuzzy c-means clustering method. In the study period, the conditional dependence structure in the precious metals futures market changed over time, as confirmed by the three identified market states. Of the contracts considered, gold and silver futures contracts demonstrated the strongest interrelationship and a relatively high likelihood of extreme events being transferred between them.

Suggested Citation

  • Ma?gorzata Just & Agnieszka Kozera & Aleksandra ?uczak, 2019. "Conditional Dependence Structure in the Precious Metals Futures Market," International Journal of Economic Sciences, International Institute of Social and Economic Sciences, vol. 8(1), pages 81-93, June.
    • Handle: RePEc:sek:jijoes:v:8:y:2019:i:1:p:81-93
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    References listed on IDEAS

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    1. Irwin, Scott H. & Sanders, Dwight R., 2012. "Financialization and Structural Change in Commodity Futures Markets," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 44(3), pages 371-396, August.
    2. Mayer, Herbert & Rathgeber, Andreas & Wanner, Markus, 2017. "Financialization of metal markets: Does futures trading influence spot prices and volatility?," Resources Policy, Elsevier, vol. 53(C), pages 300-316.
    3. Sensoy, Ahmet, 2013. "Dynamic relationship between precious metals," Resources Policy, Elsevier, vol. 38(4), pages 504-511.
    4. Beckmann, Joscha & Czudaj, Robert, 2013. "Gold as an inflation hedge in a time-varying coefficient framework," The North American Journal of Economics and Finance, Elsevier, vol. 24(C), pages 208-222.
    5. Capie, Forrest & Mills, Terence C. & Wood, Geoffrey, 2005. "Gold as a hedge against the dollar," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 15(4), pages 343-352, October.
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    Cited by:

    1. Małgorzata Just & Aleksandra Łuczak, 2020. "Assessment of Conditional Dependence Structures in Commodity Futures Markets Using Copula-GARCH Models and Fuzzy Clustering Methods," Sustainability, MDPI, vol. 12(6), pages 1-22, March.
    2. Klára Čermáková & Eduardo Aguiar Henrique Filho, 2021. "Effects of Expansionary Monetary Policy on Agricultural Commodities Market," Sustainability, MDPI, vol. 13(16), pages 1-21, August.
    3. Ondřej Bednář & Andrea Čečrdlová & Božena Kadeřábková & Pavel Řežábek, 2022. "Energy Prices Impact on Inflationary Spiral," Energies, MDPI, vol. 15(9), pages 1-25, May.

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    More about this item

    Keywords

    precious metals; copula-GARCH; dynamic dependencies; Kendall's tau coefficient; tail dependence; market states; fuzzy clustering method;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market

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