Determinants of asymmetric return comovements of gold and other financial assets

Hdl Handle:
http://hdl.handle.net/10545/621531
Title:
Determinants of asymmetric return comovements of gold and other financial assets
Authors:
Poshakwale, Sunil S. ( 0000-0003-1095-6105 ) ; Mandal, Anandadeep
Abstract:
Using conditional time-varying copula models, we characterize the dependence structure of return comovements of gold and other financial assets (stocks, bonds, real estate and oil) during economic expansion and contraction regimes. We also investigate which key macroeconomic and non-macroeconomic variables significantly impact the asset return comovements using a two stage Markov Switching Stochastic Volatility (MSSV) framework. Our results show that the non-macro variables have significant influence on the return comovements. We find that gold is an inappropriate hedge against interest rate changes for real-estate and oil-based portfolios, while for bond portfolios, gold offers a good hedge against inflation uncertainty. We also provide evidence that the “flight to safety” phenomenon is due to the implied volatility of the stock market, rather than the observed stock market uncertainty. Finally, we forecast the asset return comovements and examine their economic significance. We show that a dynamic MSSV model which includes the macroeconomic and non-macroeconomic variables yields superior forecast of future asset return comovements when compared with a multivariate conditional covariance model.
Affiliation:
Cranfield University; University of Derby
Citation:
Poshakwale, S. and Mandal, A. (2016) 'Determinants of asymmetric return comovements of gold and other financial assets', International Review of Financial Analysis, 47:229.
Publisher:
Elsevier
Journal:
International Review of Financial Analysis
Issue Date:
Oct-2016
URI:
http://hdl.handle.net/10545/621531
DOI:
10.1016/j.irfa.2016.08.001
Additional Links:
http://linkinghub.elsevier.com/retrieve/pii/S1057521916301181
Type:
Article
Language:
en
ISSN:
10575219
Sponsors:
N/A
Appears in Collections:
University of Derby Online (UDOL)

Full metadata record

DC FieldValue Language
dc.contributor.authorPoshakwale, Sunil S.en
dc.contributor.authorMandal, Anandadeepen
dc.date.accessioned2017-03-31T11:17:56Z-
dc.date.available2017-03-31T11:17:56Z-
dc.date.issued2016-10-
dc.identifier.citationPoshakwale, S. and Mandal, A. (2016) 'Determinants of asymmetric return comovements of gold and other financial assets', International Review of Financial Analysis, 47:229.en
dc.identifier.issn10575219-
dc.identifier.doi10.1016/j.irfa.2016.08.001-
dc.identifier.urihttp://hdl.handle.net/10545/621531-
dc.description.abstractUsing conditional time-varying copula models, we characterize the dependence structure of return comovements of gold and other financial assets (stocks, bonds, real estate and oil) during economic expansion and contraction regimes. We also investigate which key macroeconomic and non-macroeconomic variables significantly impact the asset return comovements using a two stage Markov Switching Stochastic Volatility (MSSV) framework. Our results show that the non-macro variables have significant influence on the return comovements. We find that gold is an inappropriate hedge against interest rate changes for real-estate and oil-based portfolios, while for bond portfolios, gold offers a good hedge against inflation uncertainty. We also provide evidence that the “flight to safety” phenomenon is due to the implied volatility of the stock market, rather than the observed stock market uncertainty. Finally, we forecast the asset return comovements and examine their economic significance. We show that a dynamic MSSV model which includes the macroeconomic and non-macroeconomic variables yields superior forecast of future asset return comovements when compared with a multivariate conditional covariance model.en
dc.description.sponsorshipN/Aen
dc.language.isoenen
dc.publisherElsevieren
dc.relation.urlhttp://linkinghub.elsevier.com/retrieve/pii/S1057521916301181en
dc.rightsArchived with thanks to International Review of Financial Analysisen
dc.subjectGolden
dc.subjectForecastingen
dc.subjectAsset return comovementsen
dc.subjectMarkov Switching stochastic volatility modelen
dc.titleDeterminants of asymmetric return comovements of gold and other financial assetsen
dc.typeArticleen
dc.contributor.departmentCranfield Universityen
dc.contributor.departmentUniversity of Derbyen
dc.identifier.journalInternational Review of Financial Analysisen
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