The role of precious metals in extreme market conditions: evidence from stock markets
Studies in Economics and Finance
ISSN: 1086-7376
Article publication date: 16 August 2021
Issue publication date: 14 January 2022
Abstract
Purpose
The purpose of this paper is to scrutinize three different points: How safe haven properties of precious metals (gold, silver, platinum and palladium) differentiate in two recent major crises such as the Global Financial Crisis (GFC) and the COVID-19 pandemic? How safe haven properties of precious metals change by the severity and the duration of shocks? and whether precious metals have hedge properties or not in normal conditions against different stock markets.
Design/methodology/approach
To analyze the time-varying behavior of precious metals with respect to stock market returns, the authors used the rolling window approach. After obtaining the time-varying beta series that way, the authors regressed the beta series on different severities of stock market shocks.
Findings
The findings show that the number of safe haven precious metals increases in the COVID-19 pandemic period compared to the GFC. Furthermore, the number of safe haven precious metals increases as the severity of shocks increases and the duration of them extended. Finally, in the absence of an extreme market condition, only gold has strong hedge asset properties.
Originality/value
To the best of the authors’ knowledge, this study is the first that examines the safe haven and hedge properties of all tradable precious metals against seven major stock markets. Besides this, it presents a comparative analysis for the safe haven properties of precious metals in terms of two major crises.
Keywords
Citation
Kangalli Uyar, S.G., Uyar, U. and Balkan, E. (2022), "The role of precious metals in extreme market conditions: evidence from stock markets", Studies in Economics and Finance, Vol. 39 No. 1, pp. 63-78. https://doi.org/10.1108/SEF-04-2021-0128
Publisher
:Emerald Publishing Limited
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