The Precious Metals Volatility Comovements and Spillovers, Hedging Strategies in Comex Market
The Precious Metals Volatility Comovements and Spillovers, Hedging Strategies in Comex Market

Summary/Abstract: This paper examined the precious metals volatility co- movements and spillovers for gold, palladium, platinum and silver in COMEX market. The results of volatility analysis were used to calculate the optimal two metal portfolio weights and hedging ratios. The data used in this study was the daily data from 2009 to 2014. The three Multivariate GARCH models, namely the VAR (1)- diagonal VECH, the VAR (1)- diagonal BEKK and the VAR (1)- CCC, were employed. The empirical results overall showed that the estimates of the multivariate GARCH parameters were statistically significant in all cases. This indicates that the short run persistence of shocks on the dynamic conditional correlations was greatest for RGOLD with RSILVER, while the largest long run persistence of shocks to the conditional correlations for RPALLADIUM with RSILVER. Finally, the results from these optimal portfolio weights base on the VAR (1)- diagonal VECH estimates suggested that investors should had more gold than palladium and other precious metals in their portfolio to minimize risk without lowering the expected return.

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