To measure the volatility spillover effects between gold market and stock market, a VAR-DCC-BVGARCH model is utilized to analyze the relationship of both. The bivariate GARCH model (BVGARCH), employed to simultaneously capture the conditional volatilities of both assets and the dynamic conditional correlation model, used to estimate their time-varying conditional correlation are combined. Empirical results show that the volatility spillover effects of both gold and stocks persist in the long run. Especially, the spillover effects from gold prices to stock prices are more obvious. Furthermore, the time-varying correlation between two assets is also found and is more significant as the volatilities of gold prices increase. These results can help investors to better manage risks and returns of the portfolio including both assets.
['Xunfa Lu', 'Jiawei Wang', 'Kin Keung Lai']
Volatility Spillover Effects between Gold and Stocks Based on VAR-DCC-BVGARCH Model