Hedging effectiveness of precious metals across frequencies: Evidence from wavelet based dynamic conditional correlation analysis

Bhatia, Vaneet, Das, Debojyoti and Kumar, Surya Bhushan (2020) Hedging effectiveness of precious metals across frequencies: Evidence from wavelet based dynamic conditional correlation analysis. Physica A: Statistical Mechanics and its Applications, 541: 123631. ISSN 3784371

[thumbnail of PA 2020.pdf] Text
PA 2020.pdf - Published Version
Restricted to Repository staff only

Download (9MB) | Request a copy

Abstract

This study examines the dynamic relationship between precious metals and stock markets of major developed (G7) and emerging (BRICS) nations. We use a hybrid wavelet-based Dynamic Conditional Correlation (DCC) approach, which allows us to investigate the dynamic relationship between precious metals and stock markets in time and frequency domain. Our results suggest that DCC between the return series of precious metals and stock market varies with timescales in terms of dynamicity, persistence and strength of relationship. G7 and BRICS nations exhibit different dynamicity with precious metals over the study period (2000 to 2017). The dynamics between precious metals and G7 stock markets show similar patterns, which depicts a clustering behaviour, however, same is not true for BRICS nations. In contrast to existing literature, this study found that silver offers better hedging capability than other precious metals for both short and long-run. To construct a two-asset optimal portfolio of precious metal and stock index, palladium emerges as the most favourable option for both short and long-run.

Item Type: Article
Keywords: Stock Markets | Precious Metals | G7 | BRICS | DCC–GARCH | Wavelet
Subjects: Physical, Life and Health Sciences > Engineering and Technology
JGU School/Centre: Jindal School of Banking & Finance
Depositing User: Amees Mohammad
Date Deposited: 24 Dec 2021 07:02
Last Modified: 18 Jan 2022 09:07
Official URL: https://doi.org/10.1016/j.physa.2019.123631
URI: https://pure.jgu.edu.in/id/eprint/385

Downloads

Downloads per month over past year

Actions (login required)

View Item
View Item