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Takashi Miyazaki, Yuki Toyoshima and Shigeyuki Hamori
''Exploring the dynamic interdependence between gold and other financial markets''
( 2012, Vol. 32 No.1 )
In this article, we explore the dynamic interdependence between gold and other financial markets by using an asymmetric dynamic conditional correlation model. The asymmetry in the dynamic conditional correlation is not recognized in many pair-wise assets and complimentary asymmetry is recognized only between gold and the euro/US dollar. In addition, we demonstrate that a structural break has occurred in the dynamic conditional correlation for the pair of gold and S&P500 index after the Lehman Brothers bankruptcy. Furthermore, we find evidence that although gold works as a safe haven in times of a stock market crash, its function is limited in the long run. We also show that the volatility index has a marginally significant explanatory power as the driving force behind the dynamic correlation between gold and the S&P500 index. This finding could be interpreted as a result of the flight to quality for gold through the recent financial turmoil.
Keywords: Gold market, Stock market, Bond market, Foreign exchange market, Interdependence, Asymmetric dynamic conditional correlation model, Flight to quality, Hedge, Safe haven
C5 - Econometric Modeling: General
Manuscript Received : Oct 20 2011 Manuscript Accepted : Jan 11 2012

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