Open Access

Volatility Implications for Asset Returns Correlation

  
Nov 23, 2024

Cite
Download Cover

Akhtaruzzaman, M., Boubaker, S., Lucey, B. M., & Sensoy, A. (2021). Is Gold a Hedge or a Safe-Haven Asset in the COVID–19 Crisis? Economic Modelling, 102, 105588. https://doi.org/10.1016/j.econmod.2021.105588 AkhtaruzzamanM. BoubakerS. LuceyB. M. SensoyA. 2021 Is Gold a Hedge or a Safe-Haven Asset in the COVID–19 Crisis? Economic Modelling 102 105588 https://doi.org/10.1016/j.econmod.2021.105588 Search in Google Scholar

Allard, A.-F., Iania, L., & Smedts, K. (2020). Stock-Bond Return Correlations: Moving Away from ‘One-Frequency-Fits-All’ by Extending the DCC-MIDAS Approach. International Review of Financial Analysis, 71, 101557. https://doi.org/10.1016/j.irfa.2020.101557 AllardA.-F. IaniaL. SmedtsK. 2020 Stock-Bond Return Correlations: Moving Away from ‘One-Frequency-Fits-All’ by Extending the DCC-MIDAS Approach International Review of Financial Analysis 71 101557 https://doi.org/10.1016/j.irfa.2020.101557 Search in Google Scholar

Bašta, M., & Molnár, P. (2018). Oil Market Volatility and Stock Market Volatility. Finance Research Letters, 26, 204–214. https://doi.org/10.1016/j.frl.2018.02.001 BaštaM. MolnárP. 2018 Oil Market Volatility and Stock Market Volatility Finance Research Letters 26 204 214 https://doi.org/10.1016/j.frl.2018.02.001 Search in Google Scholar

Baur, D. G., & Lucey, B. M. (2010). Is Gold a Hedge or a Safe Haven? An Analysis of Stocks, Bonds and Gold. Financial Review, 45(2), 217–229. https://doi.org/10.1111/j.1540-6288.2010.00244.x BaurD. G. LuceyB. M. 2010 Is Gold a Hedge or a Safe Haven? An Analysis of Stocks, Bonds and Gold Financial Review 45 2 217 229 https://doi.org/10.1111/j.1540-6288.2010.00244.x Search in Google Scholar

Będowska-Sójka, B., Demir, E., & Zaremba, A. (2022). Hedging Geopolitical Risks with Different Asset Classes: A Focus on the Russian Invasion of Ukraine. Finance Research Letters, 50(July). https://doi.org/10.1016/j.frl.2022.103192 Będowska-SójkaB. DemirE. ZarembaA. 2022 Hedging Geopolitical Risks with Different Asset Classes: A Focus on the Russian Invasion of Ukraine Finance Research Letters 50 July https://doi.org/10.1016/j.frl.2022.103192 Search in Google Scholar

Bellu, M., & Conversano, C. (2020). Protected Adaptive Asset Allocation. Finance Research Letters, 32 (November 2018), 101095. https://doi.org/10.1016/j.frl.2019.01.007 BelluM. ConversanoC. 2020 Protected Adaptive Asset Allocation Finance Research Letters 32 November 2018 101095 https://doi.org/10.1016/j.frl.2019.01.007 Search in Google Scholar

Bernhart, G., Höcht, S., Neugebauer, M., Neumann, M., & Zagst, R. (2011). Asset Correlations in Turbulent Markets and the Impact of Different Regimes on Asset Management. Asia-Pacific Journal of Operational Research, 28(1), 1–23. https://doi.org/10.1142/S0217595911003028 BernhartG. HöchtS. NeugebauerM. NeumannM. ZagstR. 2011 Asset Correlations in Turbulent Markets and the Impact of Different Regimes on Asset Management Asia-Pacific Journal of Operational Research 28 1 1 23 https://doi.org/10.1142/S0217595911003028 Search in Google Scholar

Bianchi, F., Nicolò, G., & Song, D. (2023). Inflation and Real Activity Over the Business Cycle. SSRN Electronic Journal, March 2023. https://doi.org/10.2139/ssrn.4407484 BianchiF. NicolòG. SongD. 2023 Inflation and Real Activity Over the Business Cycle SSRN Electronic Journal March 2023 https://doi.org/10.2139/ssrn.4407484 Search in Google Scholar

Breusch, T. S., & Pagan, A. R. (1979). A Simple Test for Heteroscedasticity and Random Coefficient Variation. Econometrica, 47(5), 1287–1294. https://doi.org/10.2307/1911963 BreuschT. S. PaganA. R. 1979 A Simple Test for Heteroscedasticity and Random Coefficient Variation Econometrica 47 5 1287 1294 https://doi.org/10.2307/1911963 Search in Google Scholar

Carlini, F., Cucinelli, D., Previtali, D., & Soana, M. G. (2020). Don’t Talk Too Bad! Stock Market Reactions to Bank Corporate Governance News. Journal of Banking & Finance, 121(C), 105962. https://doi.org/10.1016/j.jbankfin.2020.105962 CarliniF. CucinelliD. PrevitaliD. SoanaM. G. 2020 Don’t Talk Too Bad! Stock Market Reactions to Bank Corporate Governance News Journal of Banking & Finance 121 C 105962 https://doi.org/10.1016/j.jbankfin.2020.105962 Search in Google Scholar

Durbin, J., & Watson, G. S. (1971). Testing for Serial Correlation in Least Squares Regression. III. Biometrika, 58(1), 1–19. https://doi.org/10.2307/2334313 DurbinJ. WatsonG. S. 1971 Testing for Serial Correlation in Least Squares Regression. III Biometrika 58 1 1 19 https://doi.org/10.2307/2334313 Search in Google Scholar

Dutta, A., Bouri, E., & Noor, M. H. (2021). Climate Bond, Stock, Gold, and Oil Markets: Dynamic Correlations and Hedging Analyses During the COVID-19 Outbreak. Resources Policy, 74(2021), 102265. https://doi.org/10.1016/j.resourpol.2021.102265 DuttaA. BouriE. NoorM. H. 2021 Climate Bond, Stock, Gold, and Oil Markets: Dynamic Correlations and Hedging Analyses During the COVID-19 Outbreak Resources Policy 74 2021 102265 https://doi.org/10.1016/j.resourpol.2021.102265 Search in Google Scholar

Galariotis, E. C., Krokida, S.-I., & Spyrou, S. I. (2016). Herd Behaviour and Equity Market Liquidity: Evidence from Major Markets. International Review of Financial Analysis, 48(2016), 140–149. https://doi.org/10.1016/j.irfa.2016.09.013 GalariotisE. C. KrokidaS.-I. SpyrouS. I. 2016 Herd Behaviour and Equity Market Liquidity: Evidence from Major Markets International Review of Financial Analysis 48 2016 140 149 https://doi.org/10.1016/j.irfa.2016.09.013 Search in Google Scholar

Guirguis, H., Dutra, V. B., & McGreevy, Z. (2022). The Impact of Global Economies on US Inflation: A Test of the Phillips Curve. Journal of Economics and Finance, 46(3), 575–592. https://doi.org/10.1007/s12197-022-09583-x GuirguisH. DutraV. B. McGreevyZ. 2022 The Impact of Global Economies on US Inflation: A Test of the Phillips Curve Journal of Economics and Finance 46 3 575 592 https://doi.org/10.1007/s12197-022-09583-x Search in Google Scholar

Huang, T.-C., & Wang, K.-Y. (2017). Investors’ Fear and Herding Behaviour: Evidence from the Taiwan Stock Market. Emerging Markets Finance and Trade, 53(10), 2259–2278. https://doi.org/10.1080/1540496X.2016.1258357 HuangT.-C. WangK.-Y. 2017 Investors’ Fear and Herding Behaviour: Evidence from the Taiwan Stock Market Emerging Markets Finance and Trade 53 10 2259 2278 https://doi.org/10.1080/1540496X.2016.1258357 Search in Google Scholar

Huitema, B., & Laraway, S. (2006). Encyclopedia of Measurement and Statistics, Edition: Autocorrelation. Encyclopedia of Measurement and Statistics. USA: SAGE Publications. HuitemaB. LarawayS. 2006 Encyclopedia of Measurement and Statistics, Edition: Autocorrelation Encyclopedia of Measurement and Statistics USA SAGE Publications Search in Google Scholar

İskenderoglu, Ö., & Akdag, S. (2020). Comparison of the Effect of VIX Fear Index on Stock Exchange Indices of Developed and Developing Countries: The G20 Case. South East European Journal of Economics and Business, 15(1), 105–121. https://doi.org/10.2478/jeb-2020-0009 İskenderogluÖ. AkdagS. 2020 Comparison of the Effect of VIX Fear Index on Stock Exchange Indices of Developed and Developing Countries: The G20 Case South East European Journal of Economics and Business 15 1 105 121 https://doi.org/10.2478/jeb-2020-0009 Search in Google Scholar

Lewellen, J. (2002). Momentum and Autocorrelation in Stock Returns. The Review of Financial Studies, 15(2), 533–564. https://doi.org/10.1093/rfs/15.2.533 LewellenJ. 2002 Momentum and Autocorrelation in Stock Returns The Review of Financial Studies 15 2 533 564 https://doi.org/10.1093/rfs/15.2.533 Search in Google Scholar

Liu, W. (2021). Gold Price Analysis and Prediction Based on Pearson Correlation Analysis. Proceedings of the 2021 1st International Conference on Control and Intelligent Robotics (pp. 358–361). https://doi.org/10.1145/3473714.3473777 LiuW. 2021 Gold Price Analysis and Prediction Based on Pearson Correlation Analysis Proceedings of the 2021 1st International Conference on Control and Intelligent Robotics 358 361 https://doi.org/10.1145/3473714.3473777 Search in Google Scholar

Liu, Z., Liu, J., Zeng, Q., & Wu, L. (2022). VIX and Stock Market Volatility Predictability: A New Approach. Finance Research Letters, 48(C), 102887. https://doi.org/10.1016/j.frl.2022.102887 LiuZ. LiuJ. ZengQ. WuL. 2022 VIX and Stock Market Volatility Predictability: A New Approach Finance Research Letters 48 C 102887 https://doi.org/10.1016/j.frl.2022.102887 Search in Google Scholar

Mbanga, C., Darrat, A. F., & Park, J. C. (2019). Investor Sentiment and Aggregate Stock Returns: The Role of Investor Attention. Review of Quantitative Finance and Accounting, 53(2), 397–428. https://doi.org/10.1007/s11156-018-0753-2 MbangaC. DarratA. F. ParkJ. C. 2019 Investor Sentiment and Aggregate Stock Returns: The Role of Investor Attention Review of Quantitative Finance and Accounting 53 2 397 428 https://doi.org/10.1007/s11156-018-0753-2 Search in Google Scholar

McMillan, D. G. (2019). Cross-Asset Relations, Correlations and Economic Implications. Global Finance Journal, 41(C), 60–78. https://doi.org/10.1016/j.gfj.2019.02.003 McMillanD. G. 2019 Cross-Asset Relations, Correlations and Economic Implications Global Finance Journal 41 C 60 78 https://doi.org/10.1016/j.gfj.2019.02.003 Search in Google Scholar

Melkuev, D. (2014). Asset Return Correlations in Episodes of Systemic Crises (Master’s thesis, University of Waterloo). Retrieved from University of Waterloo website: https://core.ac.uk/download/pdf/144147638.pdf MelkuevD. 2014 Asset Return Correlations in Episodes of Systemic Crises Master’s thesis, University of Waterloo Retrieved from University of Waterloo website: https://core.ac.uk/download/pdf/144147638.pdf Search in Google Scholar

Mensi, W., Sensoy, A., Vo, X. V., & Kang, S. H. (2022). Pricing Efficiency and Asymmetric Multifractality of Major Asset Classes Before and During COVID-19 Crisis. North American Journal of Economics and Finance, 62(July), 101773. https://doi.org/10.1016/j.najef.2022.101773 MensiW. SensoyA. VoX. V. KangS. H. 2022 Pricing Efficiency and Asymmetric Multifractality of Major Asset Classes Before and During COVID-19 Crisis North American Journal of Economics and Finance 62 July 101773 https://doi.org/10.1016/j.najef.2022.101773 Search in Google Scholar

Merlo, L. F. P. (2024). VIX Tail Risk Hedging and Predictor. SSRN Electronic Journal, January (2024), 1–20. https://doi.org/10.2139/ssrn.4697974 MerloL. F. P. 2024 VIX Tail Risk Hedging and Predictor SSRN Electronic Journal January 2024 1 20 https://doi.org/10.2139/ssrn.4697974 Search in Google Scholar

Molenaar, R., Senechal, E., Swinkels, L., & Wang, Z. (2023). Empirical Evidence on the Stock-Bond Correlation. SSRN Electronic Journal, February(2023), 1–20. https://doi.org/10.2139/ssrn.4514947 MolenaarR. SenechalE. SwinkelsL. WangZ. 2023 Empirical Evidence on the Stock-Bond Correlation SSRN Electronic Journal February 2023 1 20 https://doi.org/10.2139/ssrn.4514947 Search in Google Scholar

Nystrup, P., Hansen, B. W., Olejasz Larsen, H., Madsen, H., & Lindström, E. (2017). Dynamic Allocation or Diversification: A Regime-Based Approach to Multiple Assets. Journal of Portfolio Management, 44(2), 62–73. https://doi.org/10.3905/jpm.2018.44.2.062 NystrupP. HansenB. W. Olejasz LarsenH. MadsenH. LindströmE. 2017 Dynamic Allocation or Diversification: A Regime-Based Approach to Multiple Assets Journal of Portfolio Management 44 2 62 73 https://doi.org/10.3905/jpm.2018.44.2.062 Search in Google Scholar

Ozili, P. K. (2023). The Acceptable R-Square in Empirical Modelling for Social Science Research. In C. Saliya (Ed.), Social Research Methodology and Publishing Results: A Guide to Non-Native English Speakers (pp. 134–143). IGI Global. https://doi.org/10.4018/978-1-6684-6859-3.ch009 OziliP. K. 2023 The Acceptable R-Square in Empirical Modelling for Social Science Research In SaliyaC. (Ed.), Social Research Methodology and Publishing Results: A Guide to Non-Native English Speakers 134 143 IGI Global https://doi.org/10.4018/978-1-6684-6859-3.ch009 Search in Google Scholar

Paiardini, P. (2014). The Impact of Economic News on Bond Prices: Evidence from the MTS Platform. Journal of Banking & Finance, 49(C), 302–322. https://doi.org/10.1016/j.jbankfin.2014.08.007 PaiardiniP. 2014 The Impact of Economic News on Bond Prices: Evidence from the MTS Platform Journal of Banking & Finance 49 C 302 322 https://doi.org/10.1016/j.jbankfin.2014.08.007 Search in Google Scholar

Purwanto, A., & Sudargini, Y. (2021). Partial Least Squares Structural Equation Modeling (PLS-SEM) Analysis for Social and Management Research: A Literature Review. Journal of Industrial Engineering & Management Research, 2(4), 114–123. PurwantoA. SudarginiY. 2021 Partial Least Squares Structural Equation Modeling (PLS-SEM) Analysis for Social and Management Research: A Literature Review Journal of Industrial Engineering & Management Research 2 4 114 123 Search in Google Scholar

Sandoval, L., & Franca, I. D. P. (2012). Correlation of Financial Markets in Times of Crisis. Physica A: Statistical Mechanics and Its Applications, 391(1–2), 187–208. https://doi.org/10.1016/j.physa.2011.07.023 SandovalL. FrancaI. D. P. 2012 Correlation of Financial Markets in Times of Crisis Physica A: Statistical Mechanics and Its Applications 391 1–2 187 208 https://doi.org/10.1016/j.physa.2011.07.023 Search in Google Scholar

Satchell, S. E., & Hwang, S. (2016). Tracking Error: Ex Ante Versus Ex Post Measures. In S. Satchell (Ed.), Asset Management (pp. 54–62). Palgrave Macmillan. https://doi.org/10.1007/978-3-319-30794-7_4 SatchellS. E. HwangS. 2016 Tracking Error: Ex Ante Versus Ex Post Measures In SatchellS. (Ed.), Asset Management 54 62 Palgrave Macmillan https://doi.org/10.1007/978-3-319-30794-7_4 Search in Google Scholar

Shapiro, S. S., & Wilk, M. B. (1965). An Analysis of Variance Test for Normality (Complete Samples). Biometrika, 52(3–4), 591–611. https://doi.org/10.2307/2333709 ShapiroS. S. WilkM. B. 1965 An Analysis of Variance Test for Normality (Complete Samples) Biometrika 52 3–4 591 611 https://doi.org/10.2307/2333709 Search in Google Scholar

Skiera, B., Reiner, J., & Albers, S. (2021). Regression Analysis. In Handbook of Market Research (pp. 299–327). Springer. https://doi.org/10.1007/978-3-319-57413-4_17 SkieraB. ReinerJ. AlbersS. 2021 Regression Analysis In Handbook of Market Research 299 327 Springer https://doi.org/10.1007/978-3-319-57413-4_17 Search in Google Scholar

Sun, C. (2024). Factor Correlation and the Cross Section of Asset Returns: A Correlation-Robust Machine Learning Approach. Journal of Empirical Finance, 77(C), 101497. https://doi.org/10.1016/j.jempfin.2024.101497 SunC. 2024 Factor Correlation and the Cross Section of Asset Returns: A Correlation-Robust Machine Learning Approach Journal of Empirical Finance 77 C 101497 https://doi.org/10.1016/j.jempfin.2024.101497 Search in Google Scholar

Tronzano, M. (2020). Safe-Haven Assets, Financial Crises, and Macroeconomic Variables: Evidence from the Last Two Decades (2000–2018). Journal of Risk and Financial Management, 13(3), 1–29. https://doi.org/10.3390/jrfm13030040 TronzanoM. 2020 Safe-Haven Assets, Financial Crises, and Macroeconomic Variables: Evidence from the Last Two Decades (2000–2018) Journal of Risk and Financial Management 13 3 1 29 https://doi.org/10.3390/jrfm13030040 Search in Google Scholar

Valadkhani, A. (2023). Asymmetric Downside Risk Across Different Sectors of the US Equity Market. Global Finance Journal, 57(May), 100844. https://doi.org/10.1016/j.gfj.2023.100844 ValadkhaniA. 2023 Asymmetric Downside Risk Across Different Sectors of the US Equity Market Global Finance Journal 57 May 100844 https://doi.org/10.1016/j.gfj.2023.100844 Search in Google Scholar

Vuong, G. T. H., Nguyen, M. H., & Wong, W. K. (2022). CBOE Volatility Index (VIX) and Corporate Market Leverage. Cogent Economics and Finance, 10(1), 1–22. https://doi.org/10.1080/23322039.2022.2111798 VuongG. T. H. NguyenM. H. WongW. K. 2022 CBOE Volatility Index (VIX) and Corporate Market Leverage Cogent Economics and Finance 10 1 1 22 https://doi.org/10.1080/23322039.2022.2111798 Search in Google Scholar

Wang, H. (2019). VIX and Volatility Forecasting: A New Insight. Physica A: Statistical Mechanics and Its Applications, 533(C), 121951. https://doi.org/10.1016/j.physa.2019.121951 WangH. 2019 VIX and Volatility Forecasting: A New Insight Physica A: Statistical Mechanics and Its Applications 533 C 121951 https://doi.org/10.1016/j.physa.2019.121951 Search in Google Scholar

Wang, X., Li, J., Ren, X., Bu, R., & Jawadi, F. (2023). Economic Policy Uncertainty and Dynamic Correlations in Energy Markets: Assessment and Solutions. Energy Economics, 117(C), 106475. https://doi.org/10.1016/j.eneco.2022.106475 WangX. LiJ. RenX. BuR. JawadiF. 2023 Economic Policy Uncertainty and Dynamic Correlations in Energy Markets: Assessment and Solutions Energy Economics 117 C 106475 https://doi.org/10.1016/j.eneco.2022.106475 Search in Google Scholar

Witz, K. (1990). [Review of Applied Statistics for the Behavioral Sciences, by D. E. Hinkle, W. Wiersma, & S. G. Jurs]. Journal of Educational Statistics, 15(1), 84–87. https://doi.org/10.2307/1164825 WitzK. 1990 [Review of Applied Statistics for the Behavioral Sciences, by D. E. Hinkle, W. Wiersma, & S. G. Jurs] Journal of Educational Statistics 15 1 84 87 https://doi.org/10.2307/1164825 Search in Google Scholar