Exploring the dynamic interdependence between gold and other financial markets

Takashi Miyazaki (), Yuki Toyoshima () and Shigeyuki Hamori

Economics Bulletin, 2012, vol. 32, issue 1, 37-50

Abstract: In this article, we explore the dynamic interdependence between gold and other financial markets by using an asymmetric dynamic conditional correlation model. The asymmetry in the dynamic conditional correlation is not recognized in many pair-wise assets and complimentary asymmetry is recognized only between gold and the euro/US dollar. In addition, we demonstrate that a structural break has occurred in the dynamic conditional correlation for the pair of gold and S&P500 index after the Lehman Brothers bankruptcy. Furthermore, we find evidence that although gold works as a safe haven in times of a stock market crash, its function is limited in the long run. We also show that the volatility index has a marginally significant explanatory power as the driving force behind the dynamic correlation between gold and the S&P500 index. This finding could be interpreted as a result of the flight to quality for gold through the recent financial turmoil.

Keywords: Gold market; Stock market; Bond market; Foreign exchange market; Interdependence; Asymmetric dynamic conditional correlation model; Flight to quality; Hedge; Safe haven (search for similar items in EconPapers)
JEL-codes: C5 G1 (search for similar items in EconPapers)
Date: 2012-01-11
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

Downloads: (external link)
http://www.accessecon.com/Pubs/EB/2012/Volume32/EB-12-V32-I1-P5.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ebl:ecbull:eb-11-00754

Access Statistics for this article

More articles in Economics Bulletin from AccessEcon
Bibliographic data for series maintained by John P. Conley ().