Spillovers and portfolio risk management of gold and stock markets: evidence from emerging Latin American markets

ABSTRACT

This study examines the return and volatility transmission between gold and emerging Latin American stock markets during the full sample period, the global financial crisis, and the Chinese Stock market crash. Employing the VAR-AGARCH model to estimate spillovers, the results reveal the substantial return and volatility spillovers between the gold and emerging Latin American stock markets, but these spillovers vary across different gold-stock pairs and two crises. Lastly, we also provide the optimal weights and hedge ratios for all gold-stock pairs during all sample periods. Overall, these findings provide useful insights for portfolio diversification, asset pricing, and risk management.

KEYWORDS:

• Gold markets
• stock markets
• US financial crises
• Chinese stock market crash
• VAR-AGARCH

JEL CLASSIFICATION:

• G10
• G11
• G13
• G15

Acknowledgments

I gratefully acknowledge Dr Rehman Mian (Assistant Professor, NUST University, Islamabad) for their help regarding data of study.

Availability of data and Materials

The datasets will be provided on request.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1. https://money.cnn.com/2015/07/09/news/economy/warning-sign-latin-america-economy/index.html.

2. Source: Metals Focus, World Gold Council (24 June 2020).

Additional information

Notes on contributors

Imran Yousaf

Dr. Imran Yousaf is an Assistant Professor of Finance at the Air University School of Management, Islamabad. His research interests include; Corporate Finance, Financial Markets, and Behavioral Finance. He has published in leading mainstream journals in the area of finance like, Finance Research Letters, Financial Innovation, Borsa Istanbul Review, Singapore Economic Review, Asia-Pacific Journal of Operational Research, International Journal of Housing Markets and Analysis, Journal of Risk and Financial Management, etc. 

Shoaib Ali

Shoaib Ali is a lecturer at Air University in Islamabad, Pakistan. His area of interest includes financial economics, corporate finance, risk management, Islamic banking, and financial institutions. He has several publications in leading and well-reputed national & international journals. 

Faisal Abbas

Faisal Abbas is a researcher in the Department of Accounting & Finance at The University of Lahore, Pakistan. His area of interest includes risk-management, financial economics, corporate finance, accounting, Islamic and  Conventional banking. He has publications in well-reputed national & International journals.