The Intertemporal Relation between Expected Returns and Conditional Correlations between Precious Metals and the Stock Market
16 Pages Posted: 24 May 2018
Date Written: April 15, 2018
Abstract
This study explores whether conditional correlations between precious metals and stock markets impact upon expected returns on precious metals. The empirical evidence presents that there is no significant trade–off between conditional correlations and expected returns. This study reveals that the impacts of conditional correlation are dependent upon the level of the expected returns. Interestingly, high absolute values of conditional correlations lead to increases in expected returns, suggesting that the unstable cross-asset market condition is associated with the expected returns. This result is due to a safe haven property for precious metals, and the impact is stronger on silver than on gold.
Keywords: Gold, Silver, Precious Metals, Quantile Regression, Dynamic Conditional Correlation
JEL Classification: B26, C21, G12, Q02
Suggested Citation: Suggested Citation