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Time-varying volatility spillovers between stock and precious metal markets with portfolio implications

Author

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  • Mensi, Walid
  • Al-Yahyaee, Khamis Hamed
  • Hoon Kang, Sang

Abstract

This paper investigates the time-varying risk spillovers between precious metals (gold, silver, palladium, and platinum) and major stock markets (USA, Japan, Europe and Asia) using the spillover index of Diebold and Yilmaz (2012). We also analyze asset allocations, hedge ratios, and hedging strategies. The results show evidence of volatility spillovers between precious metal and stock markets. Further, all the stock markets (except for Japanese market) are a source of volatility spillovers and the four precious metal markets are net receipt of volatility spillovers during the Global Financial Crisis and European Sovereign Debt Crisis. Finally, we find evidence of cross-market hedging, asset allocation, and hedging effectiveness.

Suggested Citation

  • Mensi, Walid & Al-Yahyaee, Khamis Hamed & Hoon Kang, Sang, 2017. "Time-varying volatility spillovers between stock and precious metal markets with portfolio implications," Resources Policy, Elsevier, vol. 53(C), pages 88-102.
  • Handle: RePEc:eee:jrpoli:v:53:y:2017:i:c:p:88-102
    DOI: 10.1016/j.resourpol.2017.06.001
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    References listed on IDEAS

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    More about this item

    Keywords

    Precious metal; Stock markets; Volatility spillovers; Hedging;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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