Bubble contagion effect between the main precious metals

Purpose: This study examines the extent to which gold and silver bubbles are correlated and which metal's bubble spills over to the other. In addition, the overlap in bubble-like episodes for the two metals is demonstrated and the influence of crises (global financial crises, European debt crisis and the COVID-19 pandemic) on the development of these episodes is compared. Design/methodology/approach: This study proposes a two-step approach. In the first step, price bubbles are identified based on the backward sup augmented Dickey–Fuller of Phillips et al. (2015a, 2015b) and modified by Phillips and Shi (2018). In the second step, the correlation in the contagion effect of the bubbles between the two precious metal prices is measured using a nonparametric regression with a time-varying coefficient approach developed by Greenaway-McGrevy and Phillips (2016). Findings: The findings suggest that the safe-haven property of gold and silver during financial market turbulence induces excessive price increases beyond their fundamental values. Furthermore, the results indicate that bubbles are contagious among precious metal markets and flow mainly from gold to silver;these findings are associated with the period after 2005, particularly during the global financial crisis. A contagious bubble effect is not found between gold and silver during the coronavirus disease 2020 pandemic. Practical implications: The results suggest that financial market participants should consider portfolio weights in precious markets in light of the bubble correlation between gold and silver, especially during crises. Originality/value: To the best of the authors' knowledge, this is the first study that explores the correlation of bubble-like episodes between gold and silver. © 2022, Emerald Publishing Limited.

Global financial crisis versus COVID-19: Evidence from sentiment analysis

This study examines the relationship between sentiment and the realized volatility of returns for different asset classes (stocks, bonds, foreign currency, and commodities). Specifically, we aim to answer two key questions: first, how does sentiment relate to volatility during crises (mainly during the global financial crisis [GFC] and the COVID-19 pandemic)? Second, can sentiment be used to forecast volatility during crises? Using two nonparametric methods, mutual information and transfer entropy, we find that information sharing and transfer increased during the pandemic. We also find that sentiment information transfer to the volatility of assets differed between the GFC and the COVID-19 crisis. Since sentiment can reduce uncertainty around the realized variance of assets, we investigate the forecasting ability of sentiment during crises. We find that sentiment has a greater predictive power on realized volatility during crises, with a differential impact on volatility depending on the asset class. Our findings carry important implications for hedging, risk management and building models to predict variance during crises.

Bubble contagion effect between the main precious metals

Purpose: This study examines the extent to which gold and silver bubbles are correlated and which metal’s bubble spills over to the other. In addition, the overlap in bubble-like episodes for the two metals is demonstrated and the influence of crises (global financial crises, European debt crisis and the COVID-19 pandemic) on the development of these episodes is compared. Design/methodology/approach: This study proposes a two-step approach. In the first step, price bubbles are identified based on the backward sup augmented Dickey–Fuller of Phillips et al. (2015a, 2015b) and modified by Phillips and Shi (2018). In the second step, the correlation in the contagion effect of the bubbles between the two precious metal prices is measured using a nonparametric regression with a time-varying coefficient approach developed by Greenaway-McGrevy and Phillips (2016). Findings: The findings suggest that the safe-haven property of gold and silver during financial market turbulence induces excessive price increases beyond their fundamental values. Furthermore, the results indicate that bubbles are contagious among precious metal markets and flow mainly from gold to silver;these findings are associated with the period after 2005, particularly during the global financial crisis. A contagious bubble effect is not found between gold and silver during the coronavirus disease 2020 pandemic. Practical implications: The results suggest that financial market participants should consider portfolio weights in precious markets in light of the bubble correlation between gold and silver, especially during crises. Originality/value: To the best of the authors’ knowledge, this is the first study that explores the correlation of bubble-like episodes between gold and silver. © 2022, Emerald Publishing Limited.

Oil prices volatility and economic performance during COVID-19 and financial crises of 2007-2008.

We examine the time-frequency dynamics of spillovers between oil price shocks and economic performance globally. We use both time and frequency domains simultaneously to find the response of macroeconomic performance to changes in oil prices during the global financial and pandemic crises. Using Wavelet analysis, this seminal study explores the connectedness between oil price shocks and economic activities during COVID-19 and the financial crises of 2008. This study finds that both economic activities and oil prices have shown high power during the period of global financial crises. The recently COVID-19 outbreak indicates significant volatility in economic activities and oil prices during the period of crisis. Moreover, we observe a strong interconnectedness between oil prices and economic activities during global financial crises and COVID-19 crises. We argue that a shock to oil prices in global financial crises and the COVID-19 outbreak has serious repercussions for economic activities. The highest total connectedness between oil prices and economic activities is observed during the COVID-19 outbreak, which advocates that the speed of information transmission amid oil prices and economic activities is greater in the era of the COVID-19 outbreak as compared to other global financial crises. The results of this study have significant implications for policymakers.

COVID-19's disasters are perilous than Global Financial Crisis: A rumor or fact?

This investigation employed the Asymmetric Power GARCH model and found that COVID-19 substantially harms the US and Japan's market returns. Moreover, COVID-19 has influenced the variance of the US, Germany, and Italy's stock markets more than the Global Financial Crises (GFC). However, GFC indicated a more significant impact on the financial volatility of the Nikkei 225 index and SSEC than COVID-19. The study confirmed the leverage effect for the S&P 500, Nasdaq Composite Index, DAX 30, Nikkei 225, FTSE MIB, and SSEC. The analysis authenticated that the health crisis that befell due to COVID-19 have imperatively originated the financial crisis globally; however, the Asian markets still make available better prospects for portfolio optimization.