Dynamic causality between the U.S. stock market, the Chinese stock market and the global gold market: implications for individual investors’ diversification strategies

Ganghua Mei and Robert McNown

Applied Economics, 2019, vol. 51, issue 43, 4742-4756

Abstract: This paper proposes a generalization of the prior VAR and EGARCH model to explore the linkage between returns and volatility transmissions in the U.S. stock market, the Chinese stock market, and the global gold market from 10 July 1996 to 20 July 2018. We found that past returns of the U.S. stock market can predict the current returns of the other two markets, and that significant reciprocal volatility transmission existed within and across all three markets. We further implemented average out-of-sample (OOS) forecasting to show that a risk-adjusted portfolio, such as mean-variance with sample estimator, does not outperform an equal-weighted portfolio. This provides insights for individual investors and helps to explain the ongoing disagreement in the portfolio literature concerning the effectiveness of risk-adjusted portfolios and equal-weighted portfolios when the number of assets is small.

Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://hdl.handle.net/10.1080/00036846.2019.1601156 (text/html)
Access to full text is restricted to subscribers.

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:taf:applec:v:51:y:2019:i:43:p:4742-4756

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036846.2019.1601156

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().