Do Precious Metals Act As Hedges and Safe Heavens against G-7 Stock Markets?: A Vine Copula Approach
29 Pages Posted: 20 Dec 2017 Last revised: 28 Nov 2018
Date Written: December 19, 2017
This paper investigates the role of precious metals (Gold, Silver and Platinum) as hedge and/or safe haven assets against the G-7 stock markets that represents the most developed economies, by characterizing the multivariate dependence structure using vine copulas, mainly the C-vine and the D-vine, to capture more flexibly the dependencies between the three precious metals and each stock market index. Therefore, by the information about the dependence on average and the dependence in extreme market conditions provided by the vine copula, we find that all precious metals under study serve as hedge and safe haven assets in almost all countries with different degrees.
These results are crucial for both investors and risk managers to understand portfolio diversification and risk reduction by including these precious metals in their investment portfolios.
Keywords: Precious Metals, G-7 Stock Markets, Vine Copulas, Hedge, Safe Haven, Diversification
JEL Classification: C02, C58, G1
Suggested Citation: Suggested Citation