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Cointegration with Regime Shift between Gold and Financial Variables

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  • Takashi Miyazaki
  • Shigeyuki Hamori

Abstract

This paper investigates the long-run relationship between gold and three main financial variables based on daily data from January 1990 to May 2013. By using the Gregory¨CHansen cointegration test, we show that there exists a cointegrating relation with regime shift between gold and the three financial variables, namely the short-term interest rate, value of US dollar, and stock index. Furthermore, taking into account the regime shift, we estimate the cointegrating vector by employing the dynamic ordinary least squares estimation and find that the coefficients of most of the financial variables have grown in terms of absolute value in later years. This finding implies that gold has begun to be regarded as an important financial asset for making effective investments.

Suggested Citation

  • Takashi Miyazaki & Shigeyuki Hamori, 2014. "Cointegration with Regime Shift between Gold and Financial Variables," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 5(4), pages 90-97, October.
    • Handle: RePEc:jfr:ijfr11:v:5:y:2014:i:4:p:90-97
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    Cited by:

    1. Walid Bakry & Audil Rashid & Somar Al-Mohamad & Nasser El-Kanj, 2021. "Bitcoin and Portfolio Diversification: A Portfolio Optimization Approach," JRFM, MDPI, vol. 14(7), pages 1-24, June.
    2. Takashi Miyazaki & Shigeyuki Hamori, 2018. "The Determinants Of A Simultaneous Crash In Gold And Stock Markets: An Ordered Logit Approach," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 13(01), pages 1-25, March.
    3. Massimo Guidolin & Francesco Melloni & Manuela Pedio, 2019. "A Markov Switching Cointegration Analysis of the CDS-Bond Basis Puzzle," BAFFI CAREFIN Working Papers 19121, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    4. T. Miyazaki & S. Hamori, 2016. "Asymmetric correlations in gold and other financial markets," Applied Economics, Taylor & Francis Journals, vol. 48(46), pages 4419-4425, October.
    5. Takashi Miyazaki, 2019. "Clarifying the Response of Gold Return to Financial Indicators: An Empirical Comparative Analysis Using Ordinary Least Squares, Robust and Quantile Regressions," JRFM, MDPI, vol. 12(1), pages 1-18, February.
    6. Riadh Abed & Amna Zardoub, 2019. "On the co-movements among gold and other financial markets: a multivariate time-varying asymmetric approach," International Economics and Economic Policy, Springer, vol. 16(4), pages 701-719, October.

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