Volatility transmission between gold and oil futures under structural breaks
Source of Publication
International Review of Economics and Finance
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.
GARCH, Gold volatility, Oil volatility, Structural breaks, Volatility transmission
Ewing, Bradley T. and Malik, Farooq, "Volatility transmission between gold and oil futures under structural breaks" (2013). All Works. 3930.
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