Interdependence structure of precious metal prices: A multi-scale perspective
George Tweneboah and
Resources Policy, 2018, vol. 59, issue C, 427-434
We apply wavelet multiple correlations and cross-correlations based on the maximal overlap discrete transform estimator to provide evidence on the dynamic linkages among precious metals for data covering January 2000 to July 2018. The results from bivariate and multivariate correlations suggest that the evolution of the correlation structure in precious metals has been far from homogeneous both along time and across timescales. From the cross-correlations analysis, it was established that different metals have the potential to lead at various scales, albeit at different leads or lags. Platinum has the potential to lead at fortnightly scale; silver has the potential to follow at longer (biannual to annual) scales, and gold has the potential to lead at all the other scales. The evidence points out that there are more potential gains of diversification at lower frequencies (longer time horizons) than higher frequencies (shorter time horizons) in the markets. Specifically, there are more opportunities for portfolio diversification for short term investors than their long term counterparts.
Keywords: Metals; Interdependence; Portfolio diversification; Volatility transmission; MODWT; Wavelet multiple correlation (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:59:y:2018:i:c:p:427-434
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