Metal volatility in presence of oil and interest rate shocks

The role of outliers and oil price shocks on volatility of metal prices

“…Moreover, for nickel and palladium the term is not statistically significant under this model. These findings are in line with Hammoudeh and Yuan (2008) who suggest the leverage effect only for the copper market and the inverse leverage effect for the gold and silver markets, and in line with Chkili et al (2014) who find an inverse leverage effect for the gold and silver markets. Accordingly the authors suggest that gold and silver can be good investments in prospect of bad news, In another study Carpantier (2010) finds the leverage effect for the stock markets and the inverse leverage effect for commodity markets, including metals and agricultures.…”

“…In this context, Mckenzie et al (2001) investigate the volatility of precious metal prices using the univariate power ARCH model and do not find an asymmetric effect in metal markets, Hammoudeh and Yuan (2008) apply the univariate GARCH-type models to examine the volatility of gold, silver and copper prices while controlling the shocks by including oil price and the US interest rate. They find an inverse leverage effect in the gold and silver markets and a leverage effect in the copper market, Hammoudeh et al (2011) examine the volatility of precious metal prices using the GARCH-type models and develop the corresponding risk management effect.…”

“…These reasons surge the linkages between crude oil and non-energy markets, including agricultures and metals. In this context, some studies focus on volatility spillovers between metals and energy markets, using the bivariate or multivariate GARCH-type models (see e.g., Choi and Hammoudeh, 2010;Ji and Fan, 2012;Mensi et al, 2013;Ewing and Malik, 2013;Charlot and Marimoutou, 2014); some apply volatility indices to examine uncertainty transmission between oil, non-energy commodities and stocks using the cointegration and the Granger causality approaches (see e.g., Liu et al, 2013); a number of studies examine the relation between oil and metal prices applying the cointegration and the Granger causality procedures (see e.g., Soytas et al, 2009;Zhang and Wei, 2010;Sari et al, 2010;Jain and Ghosh, 2013;Mensi et al, 2013); and finally a few studies apply the univariate GARCH-type models to examine volatility of metals while including oil prices as the control variable to the mean and variance equations (see e.g., Hammoudeh and Yuan, 2008).…”

Volatility Modeling and Forecasting of Istanbul Gold Exchange (IGE)

“…Likewise the studies of Conover et al (2009), Riley (2010, Hammoudeh et al (2011) highlight the advantages of precious metals in improving portfolio performance. Hammoudeh and Yuan (2008) analyze the conditional volatility of gold, silver and copper, and report more persistent conditional volatility with lower leverage effects for gold and silver in comparison to copper. Hammoudeh et al (2010) report both short-term and long-term correlation dependencies and interdependencies between gold, silver, palladium and platinum.…”

“…Cai et al (2001) examine the volatility in gold futures in the US and report GDP (gross domestic product) and CPI (consumer price index) as important factors in impelling volatility. There is also a strand of literature which discusses gold as a hedge instrument in the context of international inflation due to high oil prices and the devaluation of the US dollar against the currencies of oil producing countries (Mahdavi and Zhou, 1997;Tully and Lucey, 2007;Nakamura and Small, 2007;Hammoudeh and Yuan, 2008;Soytas et al, 2009;Sari et al, 2010;Narayan et al, 2010;Morales and Andreosso-O'Callaghan, 2011). Shafiee and Topal (2010) argue that between 1968 and 2008 there have been two jumps in oil prices, the first one in 1979-1980 and the second one in 2007-2008 which are both followed by jumps in gold prices.…”