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Gold, Oil, and Stocks

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  • Jozef Barunik
  • Evzen Kocenda
  • Lukas Vacha

Abstract

We employ a wavelet approach and conduct a time-frequency analysis of dynamic correlations between pairs of key traded assets (gold, oil, and stocks) covering the period from 1987 to 2012. The analysis is performed on both intra-day and daily data. We show that heterogeneity in correlations across a number of investment horizons between pairs of assets is a dominant feature during times of economic downturn and financial turbulence for all three pairs of the assets under research. Heterogeneity prevails in correlations between gold and stocks. After the 2008 crisis, correlations among all three assets increase and become homogenous: the timing differs for the three pairs but coincides with the structural breaks that are identified in specific correlation dynamics. A strong implication emerges: during the period under research, and from a different-investment-horizons perspective, all three assets could be used in a well-diversified portfolio only during relatively short periods.

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Paper provided by arXiv.org in its series Papers with number 1308.0210.

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Date of creation: Aug 2013
Date of revision: Mar 2014
Handle: RePEc:arx:papers:1308.0210

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Cited by:
  1. Jozef BARUNÍK & Lukáš VÁCHA, 2013. "Contagion among Central and Eastern European Stock Markets during the Financial Crisis," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, Charles University Prague, Faculty of Social Sciences, vol. 63(5), pages 443-453, November.

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