IDEAS home Printed from https://ideas.repec.org/a/eee/jrpoli/v59y2018icp427-434.html
   My bibliography  Save this article

Interdependence structure of precious metal prices: A multi-scale perspective

Author

Listed:
  • Tweneboah, George
  • Alagidede, Paul

Abstract

We apply wavelet multiple correlations and cross-correlations based on the maximal overlap discrete transform estimator to provide evidence on the dynamic linkages among precious metals for data covering January 2000 to July 2018. The results from bivariate and multivariate correlations suggest that the evolution of the correlation structure in precious metals has been far from homogeneous both along time and across timescales. From the cross-correlations analysis, it was established that different metals have the potential to lead at various scales, albeit at different leads or lags. Platinum has the potential to lead at fortnightly scale; silver has the potential to follow at longer (biannual to annual) scales, and gold has the potential to lead at all the other scales. The evidence points out that there are more potential gains of diversification at lower frequencies (longer time horizons) than higher frequencies (shorter time horizons) in the markets. Specifically, there are more opportunities for portfolio diversification for short term investors than their long term counterparts.

Suggested Citation

  • Tweneboah, George & Alagidede, Paul, 2018. "Interdependence structure of precious metal prices: A multi-scale perspective," Resources Policy, Elsevier, vol. 59(C), pages 427-434.
    • Handle: RePEc:eee:jrpoli:v:59:y:2018:i:c:p:427-434
    DOI: 10.1016/j.resourpol.2018.08.013
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301420718303143
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.resourpol.2018.08.013?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Hammoudeh, Shawkat M. & Yuan, Yuan & McAleer, Michael & Thompson, Mark A., 2010. "Precious metals-exchange rate volatility transmissions and hedging strategies," International Review of Economics & Finance, Elsevier, vol. 19(4), pages 633-647, October.
    2. Hammoudeh, Shawkat & Malik, Farooq & McAleer, Michael, 2011. "Risk management of precious metals," The Quarterly Review of Economics and Finance, Elsevier, vol. 51(4), pages 435-441.
    3. Baur, Dirk G. & McDermott, Thomas K., 2010. "Is gold a safe haven? International evidence," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1886-1898, August.
    4. Angus Deaton, 1999. "Commodity Prices and Growth in Africa," Journal of Economic Perspectives, American Economic Association, vol. 13(3), pages 23-40, Summer.
    5. Emrah Oral & Gazanfer Unal, 2017. "Co-movement of precious metals and forecasting using scale by scale wavelet transform," International Journal of Financial Engineering (IJFE), World Scientific Publishing Co. Pte. Ltd., vol. 4(01), pages 1-21, March.
    6. Dirk G. Baur & Brian M. Lucey, 2010. "Is Gold a Hedge or a Safe Haven? An Analysis of Stocks, Bonds and Gold," The Financial Review, Eastern Finance Association, vol. 45(2), pages 217-229, May.
    7. Sensoy, Ahmet, 2013. "Dynamic relationship between precious metals," Resources Policy, Elsevier, vol. 38(4), pages 504-511.
    8. Jonathan A. Batten & Cetin Ciner & Brian M. Lucey, 2015. "Which precious metals spill over on which, when and why? Some evidence," Applied Economics Letters, Taylor & Francis Journals, vol. 22(6), pages 466-473, April.
    9. Batten, Jonathan A. & Ciner, Cetin & Lucey, Brian M., 2010. "The macroeconomic determinants of volatility in precious metals markets," Resources Policy, Elsevier, vol. 35(2), pages 65-71, June.
    10. Ciner, Cetin & Gurdgiev, Constantin & Lucey, Brian M., 2013. "Hedges and safe havens: An examination of stocks, bonds, gold, oil and exchange rates," International Review of Financial Analysis, Elsevier, vol. 29(C), pages 202-211.
    11. Bhatia, Vaneet & Das, Debojyoti & Tiwari, Aviral Kumar & Shahbaz, Muhammad & Hasim, Haslifah M., 2018. "Do precious metal spot prices influence each other? Evidence from a nonparametric causality-in-quantiles approach," Resources Policy, Elsevier, vol. 55(C), pages 244-252.
    12. Cashin, Paul & McDermott, C. John & Scott, Alasdair, 2002. "Booms and slumps in world commodity prices," Journal of Development Economics, Elsevier, vol. 69(1), pages 277-296, October.
    13. Sari, Ramazan & Hammoudeh, Shawkat & Soytas, Ugur, 2010. "Dynamics of oil price, precious metal prices, and exchange rate," Energy Economics, Elsevier, vol. 32(2), pages 351-362, March.
    14. Pierdzioch, Christian & Risse, Marian & Rohloff, Sebastian, 2016. "Are precious metals a hedge against exchange-rate movements? An empirical exploration using bayesian additive regression trees," The North American Journal of Economics and Finance, Elsevier, vol. 38(C), pages 27-38.
    15. Arouri, Mohamed El Hedi & Hammoudeh, Shawkat & Lahiani, Amine & Nguyen, Duc Khuong, 2012. "Long memory and structural breaks in modeling the return and volatility dynamics of precious metals," The Quarterly Review of Economics and Finance, Elsevier, vol. 52(2), pages 207-218.
    16. Brian M. Lucey & Sile Li, 2015. "What precious metals act as safe havens, and when? Some US evidence," Applied Economics Letters, Taylor & Francis Journals, vol. 22(1), pages 35-45, January.
    17. Das, Debojyoti & Kannadhasan, M. & Al-Yahyaee, Khamis Hamed & Yoon, Seong-Min, 2018. "A wavelet analysis of co-movements in Asian gold markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 492(C), pages 192-206.
    18. Alan Greenspan, 1993. "The Fed Aims for Price Stability," Challenge, Taylor & Francis Journals, vol. 36(5), pages 4-10, September.
    19. Bredin, Don & Conlon, Thomas & Potì, Valerio, 2017. "The price of shelter - Downside risk reduction with precious metals," International Review of Financial Analysis, Elsevier, vol. 49(C), pages 48-58.
    20. Agyei-Ampomah, Sam & Gounopoulos, Dimitrios & Mazouz, Khelifa, 2014. "Does gold offer a better protection against losses in sovereign debt bonds than other metals?," Journal of Banking & Finance, Elsevier, vol. 40(C), pages 507-521.
    21. Chen, Mei-Hsiu, 2010. "Understanding world metals prices--Returns, volatility and diversification," Resources Policy, Elsevier, vol. 35(3), pages 127-140, September.
    22. Kang, Sang Hoon & Tiwari, Aviral Kumar & Albulescu, Claudiu Tiberiu & Yoon, Seong-Min, 2019. "Time-frequency co-movements between the largest nonferrous metal futures markets," Resources Policy, Elsevier, vol. 61(C), pages 393-398.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Aikins Abakah, Emmanuel Joel & Gil-Alana, Luis A. & Tripathy, Trilochan, 2022. "Stochastic structure of metal prices: Evidence from fractional integration non-linearities and breaks," Resources Policy, Elsevier, vol. 78(C).
    2. Huang, Xiaohong & Huang, Shupei, 2020. "Identifying the comovement of price between China's and international crude oil futures: A time-frequency perspective," International Review of Financial Analysis, Elsevier, vol. 72(C).
    3. Khalfaoui, Rabeh & Tiwari, Aviral Kumar & Kablan, Sandrine & Hammoudeh, Shawkat, 2021. "Interdependence and lead-lag relationships between the oil price and metal markets: Fresh insights from the wavelet and quantile coherency approaches," Energy Economics, Elsevier, vol. 101(C).
    4. Mensi, Walid & Nekhili, Ramzi & Vo, Xuan Vinh & Kang, Sang Hoon, 2021. "Quantile dependencies between precious and industrial metals futures and portfolio management," Resources Policy, Elsevier, vol. 73(C).
    5. Chen, Jinyu & Huang, Yuxin & Ren, Xiaohang & Qu, Jingxiao, 2022. "Time-varying spillovers between trade policy uncertainty and precious metal markets: Evidence from China-US trade conflict," Resources Policy, Elsevier, vol. 76(C).
    6. Tweneboah, George & Owusu Junior, Peterson & Kumah, Seyram Pearl, 2020. "Modelling the asymmetric linkages between spot gold prices and African stocks," Research in International Business and Finance, Elsevier, vol. 54(C).
    7. Duc Huynh, Toan Luu & Burggraf, Tobias & Wang, Mei, 2020. "Gold, platinum, and expected Bitcoin returns," Journal of Multinational Financial Management, Elsevier, vol. 56(C).
    8. Qadan, Mahmoud, 2019. "Risk appetite and the prices of precious metals," Resources Policy, Elsevier, vol. 62(C), pages 136-153.
    9. Pradhan, Rudra P. & Hall, John H. & du Toit, Elda, 2021. "The lead–lag relationship between spot and futures prices: Empirical evidence from the Indian commodity market," Resources Policy, Elsevier, vol. 70(C).
    10. Mensi, Walid & Hernandez, Jose Arroeola & Yoon, Seong-Min & Vo, Xuan Vinh & Kang, Sang Hoon, 2021. "Spillovers and connectedness between major precious metals and major currency markets: The role of frequency factor," International Review of Financial Analysis, Elsevier, vol. 74(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Vigne, Samuel A. & Lucey, Brian M. & O’Connor, Fergal A. & Yarovaya, Larisa, 2017. "The financial economics of white precious metals — A survey," International Review of Financial Analysis, Elsevier, vol. 52(C), pages 292-308.
    2. Antonakakis, Nikolaos & Kizys, Renatas, 2015. "Dynamic spillovers between commodity and currency markets," International Review of Financial Analysis, Elsevier, vol. 41(C), pages 303-319.
    3. Bhatia, Vaneet & Das, Debojyoti & Tiwari, Aviral Kumar & Shahbaz, Muhammad & Hasim, Haslifah M., 2018. "Do precious metal spot prices influence each other? Evidence from a nonparametric causality-in-quantiles approach," Resources Policy, Elsevier, vol. 55(C), pages 244-252.
    4. Al-Yahyaee, Khamis Hamed & Mensi, Walid & Maitra, Debasish & Al-Jarrah, Idries Mohammad Wanas, 2019. "Portfolio management and dependencies among precious metal markets: Evidence from a Copula quantile-on-quantile approach," Resources Policy, Elsevier, vol. 64(C).
    5. Nekhili, Ramzi & Sultan, Jahangir & Mensi, Walid, 2021. "Co-movements among precious metals and implications for portfolio management: A multivariate wavelet-based dynamic analysis," Resources Policy, Elsevier, vol. 74(C).
    6. Dinh, Theu & Goutte, Stéphane & Nguyen, Duc Khuong & Walther, Thomas, 2022. "Economic drivers of volatility and correlation in precious metal markets," Journal of Commodity Markets, Elsevier, vol. 28(C).
    7. Naeem, Muhammad Abubakr & Agyemang, Abraham & Hasan Chowdhury, Md Iftekhar & Hasan, Mudassar & Shahzad, Syed Jawad Hussain, 2022. "Precious metals as hedge and safe haven for African stock markets," Resources Policy, Elsevier, vol. 78(C).
    8. Walid Chkili, 2015. "Gold–oil prices co-movements and portfolio diversification implications," Economics Bulletin, AccessEcon, vol. 35(4), pages 2832-2845.
    9. Reboredo, Juan C. & Ugolini, Andrea, 2015. "Downside/upside price spillovers between precious metals: A vine copula approach," The North American Journal of Economics and Finance, Elsevier, vol. 34(C), pages 84-102.
    10. Christian Pierdzioch & Marian Risse, 2020. "Forecasting precious metal returns with multivariate random forests," Empirical Economics, Springer, vol. 58(3), pages 1167-1184, March.
    11. Chkili, Walid, 2015. "Gold-oil prices co-movements and portfolio diversification implications," MPRA Paper 68110, University Library of Munich, Germany.
    12. Pierdzioch, Christian & Risse, Marian & Rohloff, Sebastian, 2016. "Are precious metals a hedge against exchange-rate movements? An empirical exploration using bayesian additive regression trees," The North American Journal of Economics and Finance, Elsevier, vol. 38(C), pages 27-38.
    13. Charles, Amélie & Darné, Olivier & Kim, Jae H., 2015. "Will precious metals shine? A market efficiency perspective," International Review of Financial Analysis, Elsevier, vol. 41(C), pages 284-291.
    14. Vasyl Golosnoy & Anja Rossen, 2018. "Modeling dynamics of metal price series via state space approach with two common factors," Empirical Economics, Springer, vol. 54(4), pages 1477-1501, June.
    15. Berna Kirkulak-Uludag & Zorikto Lkhamazhapov, 2017. "Volatility Dynamics of Precious Metals: Evidence from Russia," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 67(4), pages 300-317, August.
    16. O'Connor, Fergal A. & Lucey, Brian M. & Batten, Jonathan A. & Baur, Dirk G., 2015. "The financial economics of gold — A survey," International Review of Financial Analysis, Elsevier, vol. 41(C), pages 186-205.
    17. Alqaralleh, Huthaifa & Canepa, Alessandra, 2022. "The role of precious metals in portfolio diversification during the Covid19 pandemic: A wavelet-based quantile approach," Resources Policy, Elsevier, vol. 75(C).
    18. Troster, Victor & Bouri, Elie & Roubaud, David, 2019. "A quantile regression analysis of flights-to-safety with implied volatilities," Resources Policy, Elsevier, vol. 62(C), pages 482-495.
    19. Bosch, David & Pradkhan, Elina, 2015. "The impact of speculation on precious metals futures markets," Resources Policy, Elsevier, vol. 44(C), pages 118-134.
    20. Semeyutin, Artur & Downing, Gareth, 2022. "Co-jumps in the U.S. interest rates and precious metals markets and their implications for investors," International Review of Financial Analysis, Elsevier, vol. 81(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jrpoli:v:59:y:2018:i:c:p:427-434. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/30467 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.