Leverage effect and dynamics correlation between international crude oil and China’s precious metals

Yufeng Chen and Fang Qu

Physica A: Statistical Mechanics and its Applications, 2019, vol. 534, issue C

Abstract: This paper examines the leverage effect and dynamic correlation between the international crude oil and China’s precious metals (gold, silver, and platinum) over the period 2006 to 2018. The model links the univariate volatilities with the dynamic correlations via combining Copula method and DCC model, which provide us with a way to analyze the multivariate joint distribution correlation while exploring the marginal distribution. The result indicates that the volatility of international crude oil and China’s precious metals has leverage effect. Specifically, gold and silver are more sensitive to good news, and crude oil is opposite of them, indicating that information shocks may have diverse asymmetric effects on the volatility of asset. Moreover, the dynamic correlation between international crude oil and China’s precious metals is generally positive, and when the financial and economic climate slowdown, there also be a negative correlation on them, which is confirmed by the test of structural break.

Keywords: Dynamic correlation; Precious metals; Oil price; Copula-DCC-GARCH; Structural breaks (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:534:y:2019:i:c:s0378437119313238

DOI: 10.1016/j.physa.2019.122319

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