The asymmetric response of higher-order moments of precious metals to energy shocks and financial stresses: Evidence from time-frequency connectedness approach

Wang Gao, Xiaoman Jin, Hongwei Zhang and Miao He

Energy Economics, 2025, vol. 142, issue C

Abstract: This paper analyzes how the higher-order moments of precious metals respond asymmetrically to energy shocks (including demand, supply, and risk shock) as well as financial stresses (such as credit, equity valuation, safe assets, funding, and volatility) using a Time-Varying Parameter Vector Autoregression (TVP-VAR) time-frequency approach. The findings reveal that financial stresses and energy shocks significantly impact the higher-order moments of precious metals, with more pronounced long-term effects. The skewness of precious metals responds positively to these shocks, indicating effective hedging properties, while their volatility remains relatively stable. In contrast, the kurtosis of precious metals shows a substantial short-term reaction but becomes more negative in the long term. Additionally, network spillover analysis indicates that financial stresses—particularly equity valuation and volatility—are the primary sources of net spillovers, while energy shocks, especially risk shocks, function as intermediaries. Gold and platinum exhibit higher-order moments that initially bear the pressure of these shocks, whereas palladium and silver’s higher-order moments act as ultimate absorbers of the disturbances. The dynamic spillover effects demonstrate significant time-varying characteristics in the responses of precious metals' higher-order moments. There are indications of increased asymmetry during crisis periods, such as the COVID-19 pandemic and the Russia-Ukraine conflict. Our research highlights the importance of considering the higher-order moments of precious metals for optimizing risk hedging and asset allocation strategies in portfolio management.

Keywords: Precious metals; Energy shocks; Financial stresses; Higher-order moments; Asymmetry (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:142:y:2025:i:c:s0140988324008806

DOI: 10.1016/j.eneco.2024.108171

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