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Precious metal markets, stock markets and the macroeconomic environment: a FAVAR model approach

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  • Nicholas Apergis
  • Christina Christou
  • James E. Payne

Abstract

This empirical study investigates the nature of spillovers between precious metal prices, i.e. gold and silver, stock markets and a number of macroeconomic variables for the G7 countries over the period 1981 to 2010. Through the methodological approach of the factor-augmented vector autoregressive (FAVAR) model, the empirical findings display that the price transmission across precious metal markets, stock markets and the macroeconomy is substantial. In particular, the results exemplify the role of the macroeconomic environment in explaining the behaviour of both gold and silver returns, while the performance of the stock markets does not appear to contribute as much.

Suggested Citation

  • Nicholas Apergis & Christina Christou & James E. Payne, 2014. "Precious metal markets, stock markets and the macroeconomic environment: a FAVAR model approach," Applied Financial Economics, Taylor & Francis Journals, vol. 24(10), pages 691-703, May.
  • Handle: RePEc:taf:apfiec:v:24:y:2014:i:10:p:691-703
    DOI: 10.1080/09603107.2014.899668
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    1. Nijman, T.E. & Swinkels, L.A.P., 2003. "Strategic and Tactical Allocation to Commodities for Retirement Savings Schemes," Discussion Paper 2003-20, Tilburg University, Center for Economic Research.
    2. Fabio Panetta & Paolo Angelini & Giuseppe Grande & Aviram Levy & Roberto Perli & Pinar Yesin & Stefan Gerlach & Srichander Ramaswamy & Michela Scatigna, 2006. "The recent behaviour of financial market volatility," Questioni di Economia e Finanza (Occasional Papers) 2, Bank of Italy, Economic Research and International Relations Area.
    3. Jeffrey A. Frankel, 2008. "The Effect of Monetary Policy on Real Commodity Prices," NBER Chapters,in: Asset Prices and Monetary Policy, pages 291-333 National Bureau of Economic Research, Inc.
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    1. repec:eee:finana:v:52:y:2017:i:c:p:292-308 is not listed on IDEAS
    2. repec:eee:jrpoli:v:53:y:2017:i:c:p:88-102 is not listed on IDEAS

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