Directional predictability from stock market sector indices to gold: A cross-quantilogram analysis

Abstract

We address the safe haven properties of gold relative to US stock market sector indices using the bivariate cross-quantilogram of Han et al. (2016). Splitting our sample into pre-and post-crisis periods, our results show that the safe haven properties of gold have a changing nature. Before and after the financial crisis, we find only limited quantile dependence and that gold can be considered a safe haven for most of the sectors, except Industrials. On a full sample (1999)(2000)(2001)(2002)(2003)(2004)(2005)(2006)(2007)(2008)(2009)(2010)(2011)(2012)(2013)(2014)(2015)(2016), there are only three sectors -Healthcare, IT, and Telecommunication services -for which gold can be considered a safe haven.

Dependence between the global gold market and emerging stock markets (E7+1): Evidence from Granger causality using quantile and quantile‐on‐quantile regression methods

“…Consistent with Baumöhl and Lyócsa (), this study used Han et al. 's () bivariate cross‐quantilogram, which measures the lead/lag dependence between (conditional) quantiles in two time series.…”

“…The literature on the dynamic relations among various commodity prices and the stock market is extensive and widespread across major regions of the world. These relations have been explored for the global market (Kang, McIver, & Yoon, ; Reboredo & Ugolini, ; Sadorsky, ), cross countries (Ciner, Gurdgiev, & Lucey, ; Choudhry, Hassan, & Shabi, ; Raza, Shahzad, Tiwari, and Shahbaz (), Asia (Arouri, Lahiani, & Nguyen, ; Bouri, Jain, Biswal, & Roubaud, 2017a; Bouri, Roubaud, Jammazi, & Assaf, 2017b; Huang, An, Gao, & Huang, ; Kumar, ; Mensi, Hammoudeh, Reboredo, & Nguyen, ; Ziaei, ), Europe (Charlot & Marimoutou, ; Hoang, Lean, & Wong, ; Shahzad, Raza, Shahbaz, & Ali, ), United States (Akgül, Bildirici, & Özdemir, ; Baruník, Kočenda, & Vácha, ; Baumöhl & Lyócsa, ; Bekiros, Nguyen, Uddin, & Sjö, ; Creti, Joëts, & Mignon, ; Gokmenoglu & Fazlollahi, ; Hood & Malik, ; Mensi, Beljid, Boubaker, & Managi, ) and Australia (Bekiros, Hernandez, Hammoudeh, & Nguyen, ).…”

“…Safe haven implications for the gold market, rather than hedges for the stock market, have been reported equally by various authors. For example, using US data from January 1999 to December 2016, Baumöhl and Lyócsa () employed Han et al. 's () bivariate cross‐quantilogram to examine the directional predictability of the stock market sector indices to gold.…”

Quantile information share

“…Jiang, Su, Todorova, and Roca (2017) consider the futures markets in the United States and China for soybeans, wheat, corn, and sugar separately and document bidirectional quantile dependence. Baumöhl and Lyócsa (2017) compare quantile dependence between gold price and stock market sector indices before and after the subprime crisis. Todorova (2017) investigates the directional predictability of overnight periods for intraday returns of large Australian stocks.…”

Network-based asset allocation strategies

“…Their results indicate that gold is not a hedge against bonds; however, for stocks, it is a hedge as well as a 5 safe haven (uncorrelated or negatively correlated asset in extreme market conditions) -but only for a limited time (around 15 trading days). Baumöhl and Lyócsa (2017) showed that the safe haven properties of gold have a changing nature. They examined the quantile dependence among gold and the U.S. stock market sector indices over the period of 1999 -2016.…”