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Journal article
Dynamic risk spillovers and portfolio risk management between precious metals and global foreign exchange markets
The North American journal of economics and finance, v 51, 101086
Jan 2020
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Abstract
•Portfolio risk evaluation and risk spillovers between precious metal and currency markets are assessed.•The DECO marginal model and the spillover index of Diebold and Yilmaz (2012, 2014) are used.•We find weak average conditional equicorrelations among the markets excluding the GFC period.•Precious metals (except platinum) and exchange rates (with few exceptions) are net shock receivers.•Precious metals provide strong risk and downside-risk reductions.
This study examines portfolio management and risk spillovers between four major precious metals (gold, silver, palladium and platinum) and 20 important U.S. exchange markets. To this end, we employ the multivariate DECO-GARCH model and the spillover index developed by Diebold and Yilmaz (2014, 2016) to examine the spillovers between those metal prices and the exchange rates and design portfolios and hedging strategies using different risk measures. The results show evidence of weak average conditional equicorrelations among the considered markets over time, excluding the turbulent 2008–2010 period. Furthermore, the precious metals (excluding platinum) and the currencies (with the exception of the Australian, Brazilian, Denmark, Euro, Mexican, Norwegian, New Zealand and Swedish currencies) are net receivers of shocks. Finally, the four precious metals provide strong risk and downside risk reductions, underscoring the usefulness of including precious metals in a traditional foreign exchange-dominated portfolio.
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Details
- Title
- Dynamic risk spillovers and portfolio risk management between precious metals and global foreign exchange markets
- Creators
- Walid Mensi - Sultan Qaboos UniversityShawkat Hammoudeh - Drexel UniversityMobeen Ur Rehman - South Ural State UniversityAlanoud Ali S. Al-Maadid - Department of Finance and Economics, College of Business and Economics, Qatar University, B.O.P 2713, Doha, QatarSang Hoon Kang - Department of Business Administration, Pusan National University, Busan 609-735, Republic of Korea
- Publication Details
- The North American journal of economics and finance, v 51, 101086
- Publisher
- Elsevier
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Economics (School of Economics)
- Web of Science ID
- WOS:000520948300079
- Scopus ID
- 2-s2.0-85074832329
- Other Identifier
- 991019167904104721
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- Collaboration types
- Domestic collaboration
- International collaboration
- Web of Science research areas
- Business, Finance
- Economics