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

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JEL Classification: B26, C21, G12, Q02

Suggested Citation

Sakemoto, Ryuta, The Intertemporal Relation between Expected Returns and Conditional Correlations between Precious Metals and the Stock Market (April 15, 2018). Available at SSRN: https://ssrn.com/abstract=3177426 or http://dx.doi.org/10.2139/ssrn.3177426

Ryuta Sakemoto (Contact Author)

Hokkaido University ( email )

5 Kita 8 Jonishi, Kita Ward
Hokkaido Prefecture
Sapporo, Hokkaido 060-0808
Japan

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