Spillovers and portfolio optimization of precious metals and global/regional equity markets

Jose Arreola Hernandez, Sang Hoon Kang and Seong-Min Yoon

Applied Economics, 2022, vol. 54, issue 20, 2320-2342

Abstract: We examine the spillovers and resource allocation characteristics of a portfolio of precious metal commodities and global/regional equity markets using a directional spillover index and portfolio optimization methods. Spillover index results show that the largest spillovers among precious metals occur between gold and silver and between zinc and lead. The largest spillovers of the world, Americas, Europe and Asia Pacific equity indices are on palladium and copper. Copper and zinc most largely spillover on the world and Americas equity indices. Copper and lead most largely spillover on the Europe equity index, while copper and silver most largely spillover on the Asia Pacific equity index. Portfolio optimization results indicate that nickel and lead add the most risk to total portfolio risk, whereas gold, platinum and aluminium add the least risk to the portfolio of commodities. Gold and aluminium are the precious metals most desirable for investment.

Date: 2022
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DOI: 10.1080/00036846.2021.1988889

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