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Leverage effect and dynamics correlation between international crude oil and China’s precious metals

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  • Chen, Yufeng
  • Qu, Fang

Abstract

This paper examines the leverage effect and dynamic correlation between the international crude oil and China’s precious metals (gold, silver, and platinum) over the period 2006 to 2018. The model links the univariate volatilities with the dynamic correlations via combining Copula method and DCC model, which provide us with a way to analyze the multivariate joint distribution correlation while exploring the marginal distribution. The result indicates that the volatility of international crude oil and China’s precious metals has leverage effect. Specifically, gold and silver are more sensitive to good news, and crude oil is opposite of them, indicating that information shocks may have diverse asymmetric effects on the volatility of asset. Moreover, the dynamic correlation between international crude oil and China’s precious metals is generally positive, and when the financial and economic climate slowdown, there also be a negative correlation on them, which is confirmed by the test of structural break.

Suggested Citation

  • Chen, Yufeng & Qu, Fang, 2019. "Leverage effect and dynamics correlation between international crude oil and China’s precious metals," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 534(C).
    • Handle: RePEc:eee:phsmap:v:534:y:2019:i:c:s0378437119313238
    DOI: 10.1016/j.physa.2019.122319
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