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Extreme risk spillover effects in world gold markets and the global financial crisis

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  • Wang, Gang-Jin
  • Xie, Chi
  • Jiang, Zhi-Qiang
  • Stanley, H. Eugene

Abstract

Using the approach of Granger causality in risk, we investigate extreme risk spillover effects among four major world gold markets (London, New York, Tokyo and Shanghai) before and after the recent global financial crisis. We find (i) that there are strong extreme risk spillover effects between London and New York, and London and Shanghai, (ii) that most of the extreme risk spillovers to Tokyo and Shanghai are from New York rather than from London, but London leads New York in risk spillovers, (iii) that extreme risk spillover effects from Tokyo and Shanghai to New York are limited, but those to London play an important role, and (iv) that extreme risk spillover effects between Tokyo and Shanghai are weak or negligible. We also find that extreme risk is more quickly transmitted in the post-crisis era than in the pre-crisis era, an effect that is related to the safe-haven or risk-hedging property or the speculative value of gold.

Suggested Citation

  • Wang, Gang-Jin & Xie, Chi & Jiang, Zhi-Qiang & Stanley, H. Eugene, 2016. "Extreme risk spillover effects in world gold markets and the global financial crisis," International Review of Economics & Finance, Elsevier, vol. 46(C), pages 55-77.
  • Handle: RePEc:eee:reveco:v:46:y:2016:i:c:p:55-77
    DOI: 10.1016/j.iref.2016.08.004
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    4. Gamba-Santamaria, Santiago & Gomez-Gonzalez, Jose Eduardo & Hurtado-Guarin, Jorge Luis & Melo-Velandia, Luis Fernando, 2017. "Stock market volatility spillovers: Evidence for Latin America," Finance Research Letters, Elsevier, vol. 20(C), pages 207-216.
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    6. H. -L. Shi & W. -X. Zhou, 2017. "Wax and wane of the cross-sectional momentum and contrarian effects: Evidence from the Chinese stock markets," Papers 1707.05552, arXiv.org.
    7. Huai-Long Shi & Wei-Xing Zhou, 2017. "Time series momentum and contrarian effects in the Chinese stock market," Papers 1702.07374, arXiv.org.
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    10. Iqbal, Javed, 2017. "Does gold hedge stock market, inflation and exchange rate risks? An econometric investigation," International Review of Economics & Finance, Elsevier, vol. 48(C), pages 1-17.
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    More about this item

    Keywords

    Gold; Risk spillover; Financial crisis; VaR;

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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