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Dynamic correlation of precious metals and flight-to-quality in developed markets

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Abstract

A flexible modification of the DCC model that accounts for asymmetry and long memory in variance is proposed. This model is applied on precious metals and indexes of developed countries to revisit the flight-to-quality phenomenon. Market turmoil and shocks are covered by asset-specific variance models. I identify Gold and partly Silver as safe haven while this status seems to be dissipating in the recent years. Interestingly, Platinum shows signs of a surrogate safe haven. The practical difference between the standard DCC and the model proposed herein is significant, which stems from a more realistic variance modeling within the framework.

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APA

Klein, T. (2017). Dynamic correlation of precious metals and flight-to-quality in developed markets. Finance Research Letters, 23, 283–290. https://doi.org/10.1016/j.frl.2017.05.002

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