Spillover Effects Among Gold, Stocks, and Bonds

15 Pages Posted: 11 Apr 2011 Last revised: 20 Mar 2012

See all articles by Steven Sumner

Steven Sumner

University of San Diego

Robert Johnson

University of San Diego - School of Business Administration

Luc Soenen

Harvard University; Tilburg University; CENTRUM

Date Written: April 8, 2011

Abstract

In this paper an attempt is made to document the interdependence among stocks, bonds and gold. Gold is an important asset class and has often been seen as a safe haven and counter-cyclical investment vehicle. We present an extension of the work done by Diebold and Yilmaz (2009) using a spillover index methodology to examine whether gold returns and volatilities can predict U.S. stock and bond market movements or vice versa. For the sample period from January 1970 until April 2009, return spillovers appear muted. However, there is some evidence of volatility spillovers of which much is attributable to a spillover from innovations in stocks to bond return volatility. Spillovers in terms of returns are higher during the early 1980s, mid-1990s and the most recent financial crisis. Volatility spillovers have been very elevated in the recent financial crisis as well as late 1970s and early 1990s. The lack of any substantial relationship between gold and stocks and gold and bonds raises the question whether gold price movements can be used as a predictor for stocks and bond prices.

Keywords: Spillover effects, gold, stock market, bond market

Suggested Citation

Sumner, Steven and Johnson, Robert and Soenen, Luc, Spillover Effects Among Gold, Stocks, and Bonds (April 8, 2011). Journal of CENTRUM Cathedra, Vol. 3, Issue 2, pp. 106-120, 2010. Available at SSRN: https://ssrn.com/abstract=1806036

Steven Sumner (Contact Author)

University of San Diego ( email )

5998 Alcala Park
San Diego, CA 92110-2492
United States
619-260-7469 (Phone)
619-260-4891 (Fax)

HOME PAGE: http://www.sandiego.edu/~sumner

Robert Johnson

University of San Diego - School of Business Administration ( email )

5998 Alcala Park
San Diego, CA 92110-2492
United States
619-260-4849 (Phone)

Luc Soenen

Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

Tilburg University

P.O. Box 90153
Tilburg, DC 5000 LE
Netherlands

CENTRUM ( email )

Daniel Alomía Robles s/n
Los Alamos de Monterrico
Surco, Lima, Lima 00001
Peru

Register to save articles to
your library

Register

Paper statistics

Downloads
601
Abstract Views
2,163
rank
43,179
PlumX Metrics