Investigating Intraday Interdependence Between Gold, Silver and Three Major Currencies: the Euro, British Pound and Japanese Yen

Stephanos Papadamou and Thomas Markopoulos ()

International Advances in Economic Research, 2014, vol. 20, issue 4, 399-410

Abstract: In this study, the interrelationship between major exchange rate returns (namely EUR/USD, GBP/USD, JPY/USD) and precious metal returns (gold and silver) is examined using a vector autoregressive model in a multivariate asymmetric GARCH framework on the intraday frequency. Our findings indicate a unidirectional volatility transmission from the majority of our currencies (EUR/USD, GBP/USD) to precious metals. The sluggish response of silver volatility to currency volatility shocks permits implementation of intraday profitable strategies, providing implications against market efficiency when analyzing intraday data. In the case of the British pound and Japanese yen, a volatility shock affects silver volatility more than gold volatility. Crisis events such as the Greek default and US credit rating downgrade reduce significantly the correlation of EUR/USD and gold/silver. The covariance between EUR/USD and silver increases after a volatility shock in EUR/USD. The same happens with JPY/USD and silver. These findings are important for portfolio managers and monetary authorities. Copyright International Atlantic Economic Society 2014

Keywords: Precious metals; Exchange rates; Hedge; GARCH; F30; F33 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (9)

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DOI: 10.1007/s11294-014-9490-z

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