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Spillovers and co-movements between precious metals and energy markets: Implications on portfolio management

Walid Mensi, Mobeen Ur Rehman and Xuan Vinh Vo

Resources Policy, 2020, vol. 69, issue C

Abstract: This paper examines co-movements, risk spillovers, and portfolio implications between precious metals (gold, platinum, and silver) and main energy (crude oil, natural gas, gasoline, and gas oil) futures price returns. We use the spillover index, different wavelet approaches, and different diversification tools. The results show dynamic volatility among markets that are intensified during financial and oil crises. Gold and oil are a net contributor to volatility whereas the remaining markets are a net receiver of risk irrespective of the market status. Moreover, we find insignificant (weak) co-movements between energy and precious metals at high (medium and low) frequency. The global financial crisis followed by the great oil price bust in 2014 intensifies return co-movements at low frequency. The results of the multivariate wavelet approach reveal that gas oil, natural gas, and gasoline intensify co-movements between crude oil and precious metals. The results of our research are of interest to investors, fund managers, and policy-makers having practical applications for better decision-making.

Keywords: Precious metals; Energy; Crisis; Spillovers; Hedging; Multivariate wavelets (search for similar items in EconPapers)
JEL-codes: G14 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.resourpol.2020.101836

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