The impact of COVID-19 pandemic on the dynamic correlations between gold and U.S. equities: evidence from multifractal cross-correlation analysis

Aktham Maghyereh, Hussein Abdoh () and Marcin Wątorek ()
Additional contact information
Hussein Abdoh: The Citadel: The Military College of South Carolina
Marcin Wątorek: Cracow University of Technology

Quality & Quantity: International Journal of Methodology, 2023, vol. 57, issue 2, No 42, 1889-1903

Abstract: Abstract This study exploits multifractal cross-correlation analysis (MFCCA) to investigate the impact of the COVID-19 pandemic on the cross-correlations between gold and U.S. equity markets using 1-min high-frequency data from January 1, 2019, to December 29, 2020. The MFCCA method shows that the pandemic caused an increase of multifractality in cross-correlations between the two markets. Specifically, the cross-correlations of small fluctuations became more persistent while those of large fluctuations became less persistent, explaining the source of multifractality. The findings of this study carry significant implications for investors, academicians, and policymakers. For example, the increase of multifractality of cross-correlation means that the non-linear relationship between gold and U.S. equity returns prevails more during economic downturns. Therefore, academicians may resort to non-linear techniques to evaluate the relationship between gold and U.S. equity markets during the health pandemic. Moreover, investors can know the value of hedging benefits over different investment time horizons during the pandemic. Finally, policymakers can better assess the economic downturns (i.e., those caused by health pandemics) over the dynamics of cross-correlation between gold and equity markets to make sound financial policies.

Keywords: COVID-19 pandemic; Gold; U.S. equity; Multifractality; Cross-correlations; Hedging (search for similar items in EconPapers)
JEL-codes: G01 G11 G15 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s11135-022-01404-x Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:qualqt:v:57:y:2023:i:2:d:10.1007_s11135-022-01404-x

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/11135

DOI: 10.1007/s11135-022-01404-x

Access Statistics for this article

Quality & Quantity: International Journal of Methodology is currently edited by Vittorio Capecchi

More articles in Quality & Quantity: International Journal of Methodology from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().