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How does the COVID-19 outbreak affect the causality between gold and the stock market? New evidence from the extreme Granger causality test

Yanran Hong, Feng Ma, Lu Wang and Chao Liang

Resources Policy, 2022, vol. 78, issue C

Abstract: The causal relationship between gold and stocks has been widely studied, while their causality and the long- and short-run characteristic of this relationship have not been examined under different shocks. The purpose of this paper is to fill this gap. Meanwhile, considering the impact of the COVID-19 outbreak on gold and stock markets, we also aim to investigate whether the relationship changes after this epidemic. With invoking the time- and frequency-domain extreme Granger causality tests, we find that a significant causality between gold and stock usually comes from extreme shocks, displaying as the long-term causality running from gold shocks to stock shocks while the fickle impact of stock shocks on gold shocks. Besides, empirical results suggest that the causality between gold and stock shocks is greatly promoted after this epidemic. The present study is useful for investors and policymakers, as it has reference significance when dealing with subsequent extreme shocks or events.

Keywords: COVID-19; Extreme Granger causality; Gold market; Stock market; Time and frequency domains (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1016/j.resourpol.2022.102859

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