Precious metals–exchange rate volatility transmissions and hedging strategies

Hammoudeh, Shawkat; Yuan, Yuan; McAleer, Michael; Thompson, Mark A.

doi:10.1016/j.iref.2010.02.003

Cited by 172 publications

(62 citation statements)

References 28 publications

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“…(This model follows the minimum-variance portfolio formula of [71], where the regime-independent covariances used in the computation of portfolio weights are obtained as the probability weighted average of regime-dependent covariances with the corresponding predictive regime probabilities as the weights.) A similar procedure is applied in a similar context in [58][59][60]72]. Table 5 presents the summary statistics for the in-sample period covering 2 January 2004-19 February 2014, with 2644 observations.…”

Section: Portfolio Analysismentioning

confidence: 99%

Do Sustainable Stocks Offer Diversification Benefits for Conventional Portfolios? An Empirical Analysis of Risk Spillovers and Dynamic Correlations

2017

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This paper explores the potential diversification benefits of socially responsible investments for conventional stock portfolios by examining the risk spillovers and dynamic correlations between conventional and sustainability stock indexes from a number of regions. We observe significant unidirectional volatility transmissions from conventional to sustainable equities, suggesting that the criteria applied for socially responsible investments do not necessarily shield these securities from common market shocks. While significant dynamic correlations are observed between sustainable and conventional stocks, particularly in Europe, the analysis of both in-and out-of-sample dynamic portfolios suggests that supplementing conventional stock portfolios with sustainable counterparts improves the risk/return profile of stock portfolios in all regions. The findings overall suggest that sustainable investments can indeed provide diversification gains for conventional stock portfolios globally.

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Section: Portfolio Analysismentioning

confidence: 99%

Do Sustainable Stocks Offer Diversification Benefits for Conventional Portfolios? An Empirical Analysis of Risk Spillovers and Dynamic Correlations

2017

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“…The precious metals are traded at COMEX in New York. They have been considered in other studies, such as Batten et al (2010), Hammoudeh et al (2010Hammoudeh et al ( , 2011, inter alia. The crude oil spot price is for the West Texas Intermediate (WTI).…”

Section: Datamentioning

confidence: 99%

Dynamic spillovers between commodity and currency markets

Antonakakis

Kizys

2015

International Review of Financial Analysis

212

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In this study, we examine the dynamic link between returns and volatility of commodities and currency markets. Based on weekly data over the period from January 6, 1987 to July 22, 2014, we find the following empirical regularities. First, our results suggest that the information contents of gold, silver, platinum, and the CHF/USD and GBP/USD exchange rates can help improve forecast accuracy of returns and volatilities of palladium, crude oil and the EUR/CHF and GBP/USD exchange rates. Second, gold (CHF/USD) is the dominant commodity (currency) transmitter of return and volatility spillovers to the remaining assets in our model. Third, the analysis of dynamic spillovers shows time-and event-specific patterns. For instance, the dynamic spillover effects originating in gold and silver (platinum) returns and volatility intensified (degraded) in the period marked by the global financial crisis. After the global financial crisis, the net transmitting role of gold and silver (platinum) returns shocks weakened (strengthened), while the net transmitting role of gold, silver and platinum volatility shocks remained relatively high. Overall, our findings reveal that, while the static analysis clearly classifies the aforementioned variables into net transmitters and net receivers, the dynamic analysis denotes episodes wherein the role of transmitters and receivers of return (volatility) spillovers can be interrupted or even reversed. Hence, even if certain commonalities prevail in each identified category of commodities, such commonalities are time-and event-dependent.

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“…This finding leads to suggest, on the one hand, the importance of accurate volatility modeling especially when gold and silver are used as underlying assets in financial derivatives contracts, and on the other hand the valuable contribution of these two metals in down markets and crisis times. Hammoudeh et al (2010) document, from a multivariate VARMA-GARCH model, weak volatility spillovers across precious metals, but strong sensitivity of metal volatility to exchange rate variability. They further point out the role of gold as a hedge against exchange rate risk when optimal weights and hedge ratios are computed.…”

Section: Introductionmentioning

confidence: 99%

“…Some papers have taken the VAR-GARCH approach to investigate the volatility spillover and hedging strategies between Gulf Arab equity sectors (Hammoudeh et al, 2009), between previous metals and exchange rates (Hammoudeh et al, 2010), between crude oil spot and futures returns of the Brent and WTI oil price benchmarks (Chang et al, 2011), and between oil and stock markets (Arouri et al, 2011). These studies commonly suggest the suitability of the VAR-GARCH model for capturing the dynamic linkages between different asset markets as well as building optimal portfolios.…”

Section: Introductionmentioning

confidence: 99%

World gold prices and stock returns in China: Insights for hedging and diversification strategies

2015

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In this paper we make use of several multivariate GARCH models (CCC-, DCC-, BEKK-, diagonal BEKK-, and VAR-GARCH) to investigate both return and volatility spillovers between world gold prices and stock market in China over the period from March 22, 2004 through March 31, 2011. We also analyze the optimal weights and hedge ratios for gold-stock portfolio holdings and show how empirical results can be used to build effective diversification and hedging strategy. Our results show evidence of significant return and volatility cross effects between gold prices and stock prices in China. In particular, past gold returns play a crucial role in explaining the dynamics of conditional return and volatility of Chinese stock market and should thus be accounted for when forecasting future stock returns. Our portfolio analysis suggests that adding gold to a portfolio of Chinese stocks improves its risk-adjusted return and that gold risk exposures can be effectively hedged in portfolios of stocks over time. Finally, we show that the VAR-GARCH model performs better than the other multivariate GARCH models.

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Precious metals–exchange rate volatility transmissions and hedging strategies

Cited by 172 publications

References 28 publications

Do Sustainable Stocks Offer Diversification Benefits for Conventional Portfolios? An Empirical Analysis of Risk Spillovers and Dynamic Correlations

Do Sustainable Stocks Offer Diversification Benefits for Conventional Portfolios? An Empirical Analysis of Risk Spillovers and Dynamic Correlations

Dynamic spillovers between commodity and currency markets

World gold prices and stock returns in China: Insights for hedging and diversification strategies

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