TY - JOUR
T1 - Time-frequency spillovers and connectedness between precious metals, oil futures and financial markets
T2 - Hedge and safe haven implications
AU - Mensi, Walid
AU - Aslan, Aylin
AU - Vo, Xuan Vinh
AU - Kang, Sang Hoon
N1 - Publisher Copyright:
© 2022 Elsevier Inc.
PY - 2023/1
Y1 - 2023/1
N2 - This paper examines the time-frequency spillovers and connectedness between the major precious metals futures markets (gold, palladium, platinum, and silver), the West Texas Intermediate (WTI) oil futures, the US stock market, the US 10-year Treasury Bond (T-Bond) market, and the US dollar index. Applying Barunik and Krehlik's (2018) novel framework, the results show that spillovers across markets strengthens in the short-term, suggesting that diversification opportunities are lower in the short-term than the long-term. Furthermore, we find that the net transmitter/receiver of spillover is dependent on the frequency being analyzed, thereby indicating asymmetric spillovers among markets. Moreover, gold and silver (platinum, T-Bonds, and US dollar index) are net transmitters (receivers) of spillover regardless of the time horizon. Palladium is the net transmitter of spillover to the other markets in the short-term period (1–8 days); in contrast, in the long-term period (8–256 days), the S&P 500 index is the net transmitter of spillover. Precious metals futures, crude oil, and T-Bond assets are diversifiers for the US stock market for short-term and the long-term investments. The US dollar index is a strong hedge regardless of the time horizon and a strong (weak) safe haven asset in the short (long) term. Precious metals are a safe haven in the short-term and long-term periods. Crude oil and T-Bonds are not a safe haven for US equity investors. Finally, our result support evidence of diversification benefits and better hedging effectiveness by adding precious metals, WTI, T-Bond, and USDX to S&P500 index, which is higher in the long-term than in the short-term. WTI offers the highest hedging effectiveness, regardless the time investment horizons.
AB - This paper examines the time-frequency spillovers and connectedness between the major precious metals futures markets (gold, palladium, platinum, and silver), the West Texas Intermediate (WTI) oil futures, the US stock market, the US 10-year Treasury Bond (T-Bond) market, and the US dollar index. Applying Barunik and Krehlik's (2018) novel framework, the results show that spillovers across markets strengthens in the short-term, suggesting that diversification opportunities are lower in the short-term than the long-term. Furthermore, we find that the net transmitter/receiver of spillover is dependent on the frequency being analyzed, thereby indicating asymmetric spillovers among markets. Moreover, gold and silver (platinum, T-Bonds, and US dollar index) are net transmitters (receivers) of spillover regardless of the time horizon. Palladium is the net transmitter of spillover to the other markets in the short-term period (1–8 days); in contrast, in the long-term period (8–256 days), the S&P 500 index is the net transmitter of spillover. Precious metals futures, crude oil, and T-Bond assets are diversifiers for the US stock market for short-term and the long-term investments. The US dollar index is a strong hedge regardless of the time horizon and a strong (weak) safe haven asset in the short (long) term. Precious metals are a safe haven in the short-term and long-term periods. Crude oil and T-Bonds are not a safe haven for US equity investors. Finally, our result support evidence of diversification benefits and better hedging effectiveness by adding precious metals, WTI, T-Bond, and USDX to S&P500 index, which is higher in the long-term than in the short-term. WTI offers the highest hedging effectiveness, regardless the time investment horizons.
KW - Asymmetric spillovers
KW - Financial markets
KW - Oil
KW - Precious metals
KW - Safe haven
UR - http://www.scopus.com/inward/record.url?scp=85137618426&partnerID=8YFLogxK
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U2 - 10.1016/j.iref.2022.08.015
DO - 10.1016/j.iref.2022.08.015
M3 - Article
AN - SCOPUS:85137618426
SN - 1059-0560
VL - 83
SP - 219
EP - 232
JO - International Review of Economics and Finance
JF - International Review of Economics and Finance
ER -