Title

Volatility transmission between gold and oil futures under structural breaks

Source of Publication

International Review of Economics and Finance

Abstract

This paper employs univariate and bivariate GARCH models to examine the volatility of gold and oil futures incorporating structural breaks using daily returns from July 1, 1993 to June 30, 2010. We find strong evidence of significant transmission of volatility between gold and oil returns when structural breaks in variance are accounted for in the model. We compute optimal portfolio weights and dynamic risk minimizing hedge ratios to highlight the significance of our empirical results. Our findings support the idea of cross-market hedging and sharing of common information by financial market participants. © 2012 Elsevier Inc.

Document Type

Article

First Page

113

Last Page

121

Publication Date

1-1-2013

DOI

10.1016/j.iref.2012.06.008

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