Volatility transmission between gold and oil futures under structural breaks

Bradley Ewing and Farooq Malik

International Review of Economics & Finance, 2013, vol. 25, issue C, 113-121

Abstract: This paper employs univariate and bivariate GARCH models to examine the volatility of gold and oil futures incorporating structural breaks using daily returns from July 1, 1993 to June 30, 2010. We find strong evidence of significant transmission of volatility between gold and oil returns when structural breaks in variance are accounted for in the model. We compute optimal portfolio weights and dynamic risk minimizing hedge ratios to highlight the significance of our empirical results. Our findings support the idea of cross-market hedging and sharing of common information by financial market participants.

Keywords: Volatility transmission; Oil volatility; Gold volatility; Structural breaks; GARCH (search for similar items in EconPapers)
JEL-codes: G1 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (182)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:25:y:2013:i:c:p:113-121

DOI: 10.1016/j.iref.2012.06.008

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