The intertemporal relation between expected returns and conditional correlations between precious metals and the stock market
DOI:
https://doi.org/10.17811/ebl.7.1.2018.24-35Resumen
This study explores whether conditional correlations between precious metals and stock markets impact upon expected returns on precious metals. The empirical evidence presents that there is no significant trade–off between conditional correlations and expected returns, which means that high returns on precious metals are not related to a lack of diversification benefits. Interestingly, high absolute values of conditional correlations lead to increases in expected returns, suggesting that the unstable cross-asset market condition is associated with the expected returns. This impact is stronger on silver than on gold.
Citas
Agyei-Ampomah, S., Gounopoulos, D. and Mazouz, K. (2014). Does gold offer a better protection against losses in sovereign debt bonds than other metals? Journal of Banking and Finance, 40, 507-521.
Bali, T.G. and Engle, R.F. (2010). The intertemporal capital asset pricing model with dynamic conditional correlations. Journal of Monetary Economics, 57. 377-390.
Batten, J.A., Ciner, C. and Lucey, B.M. (2010). The macroeconomic determinants of volatility in precious metals markets. Resources Policy, 35, 65-71.
Baur, D.G. (2013). The structure and degree of dependence: A quantile regression approach. Journal of Banking and Finance, 37, 786-798.
Baur, D.G. and Lucey, B.M. (2010). Is gold a hedge or a safe haven? An analysis of stocks, bonds and gold. The Financial Review, 45, 217-229.
Baur, D.G. and McDermott, T.K. (2010). Is gold a safe haven? International evidence. Journal of Banking and Finance, 34, 1886-1898.
Campbell, J. Y. (1987). Stock returns and the term structure. Journal of Financial Economics, 18, 373-399.
Cenedese, G., Sarno, L. and Tsiakas, I. (2014). Foreign exchange risk and the predictability of carry trade returns. Journal of Banking and Finance, 42, 302-313.
Engle, R.F. (2002). Dynamic conditional correlation: a simple class of multivariate generalized autoregressive conditional heteroskedasticity models. Journal of Business and Economic Statistics, 20, 339-350.
Feng, X., He, X. and Hu, J. (2011). Wild bootstrap for quantile regression. Biometrica, 98, 995-999.
French, K., Schwert, G. and Stambaugh, R., (1987). Expected stock returns and volatility. Journal of Financial Economics, 19, 3-29.
Ghysels, E., Santa-Clara, P. and Valkanov, R. (2005). There is risk-return trade-off after all. Journal of Financial Economics, 76, 509-548.
Glosten, L.R., Jagannathan,R. and Runkle, D.E. (1993). On the relation between the expected value and the volatility of the nominal excess return on stocks. Journal of Finance, 48, 1779-1801.
Joy, M. (2011). Gold and the US dollar: Hedge or haven? Finance Research Letters, 8, 120-131.
Koenker, R. and Bassett, G. (1978). Regression quantiles. Econometrica, 46, 33-50.
Lau, M.C.K., Vigne, S.A., Wang, S. and Yarovaya, L. (2017). Return spillovers between white precious metal ETFs: The role of oil, gold, and global equity. International Review of Financial Analysis, 52, 316-332.
Mensi, W., Hammoudeh, S., Reboredo, J.C. and Nguyen, D.K. (2014). Do global factors impact BRICS stock markets? A quantile regression approach. Emerging Market Review, 19, 1-17.
Merton, R. (1973). An intertemporal capital asset pricing model. Econometrica, 41, 867-887.
Nakatani, T. and Teräsvirta, T. (2009). Testing for volatility interactions in the constant conditional correlation GARCH model. Econometrics Journal, 12, 147-163.
Newey, W. and West, K. (1987). A simple, positive semi-definite, heteroskedasticity and autocorrelation consistent covariance matrix. Econometrica, 55, 703-708.
Reboredo, J.C. and Uddin, G.S. (2016). Do financial stress and policy uncertainty have an impact on the energy and metals markets? A quantile regression approach. International Review of Economics and Finance, 43, 284-298.
Sakemoto, R. (2017). Do precious metal and industrial metal act as hedge and safe havens for currency portfolios? Finance Research Letters, in press.
Vigne, S.A., Lucey, B.M., O’Connor, F.A. and Yarovaya, L. (2017). The financial economics of white precious metals — A survey. International Review of Financial Analysis, 52, 292-308.
Descargas
Publicado
Cómo citar
Número
Sección
Licencia
The works published in this journal are subject to the following terms:
1. Oviedo University Press (the publisher) retains the property rights (copyright) of published works, and encourages and enables the reuse of the same under the license specified in paragraph 2.
© Ediuno. Ediciones de la Universidad de Oviedo / Oviedo University Press
2. The works are published in the online edition of the journal under a Creative Commons Attribution-Non Commercial-Non Derives 3.0 Spain (legal text). You can copy, use, distribute, transmit and publicly display, provided that: i) you cite the author and the original source of publication (journal, publisher and URL of the work), ii) they are not used for commercial purposes, iii) mentions the existence and specifications of this license.
3. Conditions of self-archiving. The author can archive the post-print version of the article (publisher’s version) on the author’s personal website and/or on the web of the institution where he belong, including a link to the page of the journal and putting the way of citation of the work. Economics and Business Letters and its URL https://reunido.uniovi.es/index.php/EBL/index are the only authorized source for correctly giving the reference of the publisher’s version in every mention of the article.
