Volatility Spillovers on Precious Metals Markets: the Effects of the Asian Crisis

This paper investigates the nature of volatility spillovers between precious metals returns over the 1995- July 2007 period. We analyzed daily closing values for precious metals data, we took the US$/Troy ounce for gold, the London Free Market Platinum price in US$/Troy ounce, the London Free Market Palladium price in US$/Troy once, and the Zurich silver price in US$/kilogram. We divide our sample into a number of sub periods, prior to, during and after the Asian crisis, with the objective to provide a wide analysis of the behaviour of the precious metals markets during this crisis; we use GARCH and EGARCH modelling. The results show that there is clear evidence of volatility persistence between precious metals returns. In terms of volatility spillovers effects, the main findings are that there is evidence of volatility spillovers running in a bidirectional way in almost all the cases, with the exception of gold, that tend to generate effects in all the markets, but with little evidence in the case of the other precious metals influencing the gold market. Finally, the results from asymmetric spillover effects show that negative news have a stronger impact in these markets than positive news.