Return and volatility connectedness between gold and energy markets: Evidence from the pre- and post-COVID vaccination phases

Using a two-step VAR asymmetric BEKK GARCH model, this research explores the asymmetric return and volatility connectedness between gold and several energy markets during three subperiods: pre-COVID, before vaccination, and after vaccination. Gold's returns and volatility spillover are generally found to be time- and energy-dependent. In addition, the optimal weights, hedge ratios, and hedging effectiveness of energy commodity and gold pairs are calculated during the three subperiods. The results of optimal weights show that investors should increase their investment in energy commodities more than gold (energy commodities) during the after-vaccination period (the pre-vaccination period). Moreover, the hedging strategy would only be effective within the COVID-19 vaccination period, which could have implications for the strategic asset allocation of policy-makers and international investors. Finally, we examine the potential determinants of conditional correlations between gold and energy markets. VIX, EPU, and new confirmed cases are found to be the main predictors of correlations for most energy commodity–gold pairs during the examined period. © 2022 Economic Society of Australia, Queensland

Analysis of the dynamic return and volatility connectedness for non-ferrous industrial metals during the COVID-19 pandemic crisis

Purpose: This paper aims to examine the dynamic return and volatility connectedness for six major industrial metals (tin, lead, nickel, zinc, copper and aluminium) and the coronavirus media coverage index (MCI). Design/methodology/approach: To that purpose, this study applies the fresh time-varying parameter vector autoregression methodology (TVP–VAR model) during the sample period between 2 January, 2020, and 16 April, 2021, that is, covering the three waves of the COVID-19 pandemic crisis. Findings: This study’s results show interesting findings. First, dynamic total return and volatility connectedness changes over time, highlighting a significant increase during the third wave of the pandemic. Second, the MCI index is a leading net transmitter in terms of return and volatility at the introduction of the SARS-CoV-2 coronavirus crisis. Third, this study clearly distinguishes two profiles among industrial metals: copper and tin/zinc as net transmitters and lead and aluminium as net receivers. Finally, the most relevant differences between them are concentrated not only at the beginning of the COVID-19 pandemic (first wave) but also during the second and third waves of the coronavirus outbreak. Originality/value: To the best of the authors’ knowledge, this is the first research that explores the dynamic return and volatility connectedness in the industrial metal market, applying the TVP–VAR methodology during the first waves of the COVID-19 pandemic crisis. © 2022, Emerald Publishing Limited.

Revisiting the safe haven role of Gold across time and frequencies during the COVID-19 pandemic

This research empirically evaluates the potential diversification benefits of Gold during the COVID-19 pandemic period, when including it in equity-based asset allocation strategies. This study proposes minimum VaR portfolios, with monthly rebalance and different wavelet scales (short-run, mid-run and long-run), doing both an in-sample and out-of-sample analysis. We find much more unstable weights as the frequency of the decomposition becomes lower, and strong evidence of the outperformance of the mid-run decompositions over the rest of active management strategies and the passive management of buy and hold the variety of single equity indices. Thus, we may shed some light on the role of Gold as a safe haven when properly filtering aggregated data.

Asymmetric interdependencies between cryptocurrency and commodity markets: the COVID-19 pandemic impact

Using NARDL methodology, this research investigates some asymmetric and non-linear interconnections between leading cryptocurrency and commodity returns. Thus, this study explores potential interconnections between these cryptocurrencies and commodity markets in the period between March 07, 2018, and March 26, 2021. This paper splits the entire sample period into two independent sub-periods in order to enhance robustness: pre-COVID and COVID, to examine the impact of the pandemic on these markets. Our results confirm that the most relevant interconnection (in terms of cointegration, short- and long- asymmetry, and the persistence of the lags) between cryptos and commodities is focused on COVID-19, the pandemic sub-period, in line with previous literature. Finally, the study reveals that some cryptocurrencies such as Tether could serve as a diversifying asset or even a safe haven, in certain scenarios, in investment strategies.

Oil price shocks and the return and volatility spillover between industrial and precious metals star

This study explores the dynamic return and volatility connectedness for some dominant industrial (Aluminium, Copper, Lead, Nickel, Tin, and Zinc) and precious metals (Gold, Palladium, Platinum, Silver) to crude oil shocks (risk, demand, and supply) during the sample period between January 2, 2009 and July 17, 2020. Our findings indicate that, demand shocks and risk shocks are the dominant receiver (transmitter) of shocks from (to) for metal returns. Second, we document the time-varying nature of both total return and volatility connectedness. Third, both net directional return and volatility connectedness show that some metals such as Tin, Gold and, even, Nickel, Lead and Aluminium appear as net transmitters, at least in some intervals of the sample period analysed. On the other hand, other industrial and precious metal markets show a net receiver profile, such as Copper, Zinc and Platinum, among others. Lastly, we find more differences between the net dynamic connectedness of the metal markets analysed in terms of return than volatility. The net directional volatility connectedness increases sizably during the global crisis due to the spread of the SARS-CoV-2 coronavirus. (c) 2021 Elsevier B.V. All rights reserved.