Document Type

Working Paper

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This item is available under a Creative Commons License for non-commercial use only

Publication Details

Working paper

Abstract

This study examines volatility persistence on precious metals returns taking into account oil returns and the three world major stock equity indices (Dow Jones Industrials, FTSE 100, and Nikkei 225) using daily data over the sample period January 1995- May 2008. We first determine when large changes in the volatility of each market returns occur, by identifying major global events that would increase the volatility of these markets; the Iterated Cumulative Sums of Squares (ICSS) algorithm helps identify the break points or sudden changes in the variance of returns in each market using the standardized residuals obtained through the GARCH(1,1) mean equation. Our main results identify a clear relationship between precious metals returns and oil returns, while the interaction between precious metals and stock returns seems to be an independent one. In relation to volatility persistence, the results are showing clear evidence of high volatility persistence between these markets.