This study examines the conditional volatility and correlation dependency and
interdependency for the four major precious metals (that is, gold, silver, platinum and
palladium), while accounting for geopolitics within a multivariate system. The
implications of the estimated results for portfolio designs and hedging strategies are
also analyzed. The results for the four metals system show significant short-run and
long-run dependencies and interdependencies to news and past volatility. These
results have become more pervasive when the exchange rate and FFR are included.
Monetary policy also has a differential impact on the precious metals and the
exchange rate volatilities. Finally, the applications of the results show the optimal
weights in a two-asset portfolio and the hedging ratios for long positions.
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