Modelling the asymmetric linkages between spot gold prices and African stocks

George Tweneboah, Peterson Owusu Junior and Seyram Pearl Kumah

Research in International Business and Finance, 2020, vol. 54, issue C

Abstract: We model the asymmetric linkages between returns of spot gold prices and African stock markets using wavelets and quantile regression techniques. The maximal overlap discrete wavelet transform technique was employed to decompose the returns into short-, medium-, and long-term series and the quantile regression was employed to explore the nexus by matching their conditional distributions along 0.05 quantile intervals. We find that the relationship between gold and African stocks is frequency-dependent and asymmetric in nature across the various timescales and quantiles. We find a mixture of negative and positive connections across the various quantiles in the short- and medium-terms. In the long-term, whereas the effect of gold is positive for Ghana, Mauritius, and Nigeria; it is negative for Egypt, Morocco, South Africa, and Tunisia. The results possess important implications for risk management as dependencies are not only studied over the entire conditional distribution at once but based on quantiles and further at different frequencies. Investors can make well-informed decisions to mitigate trade risks as they closely match the time heterogeneity in the markets.

Keywords: Africa; Gold; Maximal Overlap Discrete Wavelet Transform; Quantile regressions; Stock returns (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:54:y:2020:i:c:s0275531919311882

DOI: 10.1016/j.ribaf.2020.101246

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