What drives the volatility of metal market The role of world oil price and US factors volatility

Antoni, . and Zulkefly Abdul Karim, . and Chan Weng, . What drives the volatility of metal market The role of world oil price and US factors volatility. pp. 661-677. ISSN 0128-7702

This paper examines the effect of world oil price and the US factors volatility on the volatility of returns for three precious metals (gold silver and copper) using daily data for the period of January 2010 to April 2017. The volatility of all variables was constructed using a generalized autoregressive conditional heteroskedasticity (GARCH) approach. Next an autoregressive distributed lag (ARDL) model was used in examining the relationship between the volatility of returns for these three metals on the volatility of world oil prices and US factors. The main results revealed that there was a cointegration relationship (long-run co-movement) between the volatility of returns (gold silver and copper) and the volatility of world oil price and US factors. In the long run the volatility of the US factors was statistically significant in influencing the volatility of all metals however the volatility of world oil price only significant to influence the volatility of silver and copper but not the volatility of gold. In the short run the volatility of world oil price and US factors were statistically significant in influencing the volatility of gold whereas for silver all variables were significant except for the US Dollar Index. For copper all variables were statistically significant except for world oil prices and the US Dollar Index. Therefore these results have provided more essential information for investors fund managers businesses and central bankers in managing their portfolio diversification hedging purposes and international reserve.

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Abstract

This paper examines the effect of world oil price and the US factors volatility on the volatility of returns for three precious metals (gold silver and copper) using daily data for the period of January 2010 to April 2017. The volatility of all variables was constructed using a generalized autoregressive conditional heteroskedasticity (GARCH) approach. Next an autoregressive distributed lag (ARDL) model was used in examining the relationship between the volatility of returns for these three metals on the volatility of world oil prices and US factors. The main results revealed that there was a cointegration relationship (long-run co-movement) between the volatility of returns (gold silver and copper) and the volatility of world oil price and US factors. In the long run the volatility of the US factors was statistically significant in influencing the volatility of all metals however the volatility of world oil price only significant to influence the volatility of silver and copper but not the volatility of gold. In the short run the volatility of world oil price and US factors were statistically significant in influencing the volatility of gold whereas for silver all variables were significant except for the US Dollar Index. For copper all variables were statistically significant except for world oil prices and the US Dollar Index. Therefore these results have provided more essential information for investors fund managers businesses and central bankers in managing their portfolio diversification hedging purposes and international reserve.

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Item Type:	Article
AGROVOC Term:	Oils industry
AGROVOC Term:	Metals
AGROVOC Term:	Gold
AGROVOC Term:	Copper
AGROVOC Term:	Silver
AGROVOC Term:	Market prices
AGROVOC Term:	Volatility
AGROVOC Term:	Business management
AGROVOC Term:	Inventories
AGROVOC Term:	Market strategy
Depositing User:	Mr. AFANDI ABDUL MALEK
Last Modified:	24 Apr 2025 00:55
URI:	http://webagris.upm.edu.my/id/eprint/9382

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