Analysing the gold-stock nexus using VARMA-BEKK-AGARCH and Quantile regression models: New evidence from South Africa and Nigeria

Adewuyi, Adeolu O.; Awodumi, Olabanji Benjamin; Abodunde, Temitope T.

doi:10.1016/j.resourpol.2019.02.015

Cited by 37 publications

(9 citation statements)

References 54 publications

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“…The interdependence of the two assets remains the same but with higher coefficients during the crisis, suggesting a stronger tie in the market downturn. Similar significant volatility cross-effects between gold and stock markets have been obtained in China (Arouri et al , 2015), North America, Europe, Asia (Mensi et al , 2017) and Africa (Adewuyi et al , 2019). This result implies that gold’s safe-haven property is not evident for Singaporean investors.…”

Section: Resultssupporting

confidence: 70%

Nexus between Southeast Asian stock markets, bitcoin and gold: spillover effect before and during the COVID-19 pandemic

Kakinuma

2021

JABS

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Purpose This study aims to provide empirical evidence on the return and volatility spillover effects between Southeast Asian stock markets, bitcoin and gold in the periods before and during the COVID-19 pandemic. The interdependence among different asset classes, the two leading stock markets in Southeast Asia (Singapore and Thailand), bitcoin and gold, is analyzed for diversification opportunities. Design/methodology/approach The vector autoregressive-Baba, Engle, Kraft, and Kroner-generalized autoregressive conditional heteroskedasticity model is used to capture the return and volatility spillover effects between different financial assets. The data cover the period from October 2013 to May 2021. The full period is divided into two sub-sample periods, the pre-pandemic period and the during-pandemic period, to examine whether the financial turbulence caused by COVID-19 affects the interconnectedness between the assets. Findings The stocks in Southeast Asia, bitcoin and gold become more interdependent during the pandemic. During turbulent times, the contagion effect is inevitable regardless of region and asset class. Furthermore, bitcoin does not provide protection for investors in Southeast Asia. The pricing mechanism and technology behind bitcoin are different from common stocks, yet the results indicate the co-movement of bitcoin and the Singaporean and Thai stocks during the crisis. Finally, risk-averse investors should ensure that gold constitutes a significant proportion of their portfolio, approximately 40%–55%. This strategy provides the most effective hedge against risk. Originality/value The mean return and volatility spillover is analyzed between bitcoin, gold and two preeminent stock markets in Southeast Asia. Most prior studies test the spillover effect between the same asset classes such as equities in different regions or different commodities, currencies and cryptocurrencies. Moreover, the time-series data are divided into two groups based on the structural break caused by the COVID-19 pandemic. The findings of this study offer practical implications for risk management and portfolio diversification. Diversification opportunities are becoming scarce as different financial assets witness increasing integration.

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Section: Resultssupporting

confidence: 70%

Nexus between Southeast Asian stock markets, bitcoin and gold: spillover effect before and during the COVID-19 pandemic

Kakinuma

2021

JABS

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“…Firstly, as per our best understanding and published evidence, it is the first research that examines the return and volatility spillover between gold and LA equity markets during crisis periods, especially in the CSMC. However, literature provides the evidence of various studies that examines return/volatility transmission between world stock markets and gold (Badshah et al , 2013; Arouri et al , 2015; Gao and Zhang, 2016; Balcilar et al , 2018; Kang and Yoon, 2019; Jiang et al , 2019; Akkoc and Civcir, 2019; Adewuyi et al , 2019). Because none of the aforementioned research investigates the return/volatility relationships between gold and LA equity markets during the CSMC, therefore this study fills this literature gap.…”

Section: Introductionmentioning

confidence: 99%

Linkages between gold and Latin American equity markets: portfolio implications

Yousaf

Hanif

Ali

et al. 2021

JEFAS

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PurposeThe authors aim to examine the mean and volatility linkages between the gold market and the Latin American equity markets in the entire sample period and two crises periods, namely the US financial crisis and the Chinese crash.Design/methodology/approachTo examine the return and volatility spillovers, the authors employ VAR-BEKK-GARCH model on the daily data of four emerging Latin American equity markets which include Peru, Chile, Brazil and Mexico, which ranges from January 2000 to June 2018.FindingsThe results show that the return transmissions vary across the stock markets and the crises periods. The volatility transmission is found to be bidirectional between the gold and stock markets of Brazil and Chile during the US financial crisis. Furthermore, the volatility spillover is unidirectional from Brazil to gold and from gold to Peru stock market during the Chinese crash. We also calculate the optimal weights hedge ratios for gold and stock portfolio. The result suggests that portfolio managers need to increase the weight of gold for the equity portfolios of Peru and Mexico during the US financial crisis. Furthermore, during the Chinese crisis, investors may raise the investment in gold for the equity portfolios of Brazil and Chile. Finally, the cheapest hedging strategy is CHIL/GOLD during the US financial crisis, whereas MEXI/GOLD during the Chinese crash.Practical implicationsThese findings have useful insights for portfolio diversification, asset pricing and risk management.Originality/valueThe study's outcome provides policymakers and investors with in-depth insights regarding hedging, risk management and portfolio management.

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“…On the methodological front, other important studies examined the relationship between precious metals and other assets, like stock and bonds, using quantile-based approaches. These include Baur and Lucey (2010) , Mensi et al (2014) , Iqbal (2017) and Adewuyi et al (2019) . An interesting model is suggested in Al-Yanyaee et al (2020) , where a copula quantile-on-quantile regression was used to examine the correlation between precious metals at different quantiles.…”

Section: Literature Reviewmentioning

confidence: 99%

The role of precious metals in portfolio diversification during the Covid19 pandemic: A wavelet-based quantile approach

Alqaralleh

Canepa

2022

Resources Policy

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In this study the relation between stock markets and precious metals during first wave of Covid-19 pandemic are investigated. We use a wavelet-based quantile procedure to investigate correlation between major stock markets of emerging countries (BRIC) and the United States. Our procedure reveals that precious metals offer market diversification opportunities during the period under consideration. In particular, it is found the gold, silver, platinum, and palladium, all serve as safe-haven assets during periods of market distress across short, medium and long investment horizons.

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Analysing the gold-stock nexus using VARMA-BEKK-AGARCH and Quantile regression models: New evidence from South Africa and Nigeria

Cited by 37 publications

References 54 publications

Nexus between Southeast Asian stock markets, bitcoin and gold: spillover effect before and during the COVID-19 pandemic

Nexus between Southeast Asian stock markets, bitcoin and gold: spillover effect before and during the COVID-19 pandemic

Linkages between gold and Latin American equity markets: portfolio implications

The role of precious metals in portfolio diversification during the Covid19 pandemic: A wavelet-based quantile approach

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