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An application of MGARCH-DCC analysis on selected currencies in terms of gold Price

Author

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  • Mohamad, Sharifah Fairuz Syed
  • Masih, Mansur

Abstract

The trading between currencies in Islam when both parties’ responsibilities are postponed to the future has been regarded as non-halal or un-islamic. Since there are many controversies in the area of currency, there have been suggestions to enhance investments in gold to avoid the element of ‘syubhah’ or doubts since gold has been used in the past for many functions. Investment in gold has been in demand for the past few years especially in hedging strategies. In this paper, we study the relationships between selected currencies in terms gold prices and their movements in volatility and correlation using the MGARCH-DCC analysis. Findings of the study tend to indicate the opportunities of various diversification portfolios for the interested gold investors. The findings of the study are of benefit to gold investors especially for diversification and investment purposes.

Suggested Citation

  • Mohamad, Sharifah Fairuz Syed & Masih, Mansur, 2013. "An application of MGARCH-DCC analysis on selected currencies in terms of gold Price," MPRA Paper 62349, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:62349
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    File URL: https://mpra.ub.uni-muenchen.de/62349/1/MPRA_paper_62349.pdf
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    References listed on IDEAS

    as
    1. Toraman, Cengiz & Basarir, Cagatay & Bayramoglu, Mehmet Fatih, 2011. "Determination of Factors Affecting the Price of Gold: A Study of MGARCH Model," Business and Economics Research Journal, Uludag University, Faculty of Economics and Administrative Sciences, vol. 2(4), pages 1-37, October.
    2. Shawkat M.Hammoudeh & Yuan Yuan & Michael McAleer, 2010. "Exchange Rate and Industrial Commodity Volatility Transmissions, Asymmetries and Hedging Strategies," Working Papers in Economics 10/33, University of Canterbury, Department of Economics and Finance.
    3. Inagaki, Kazuyuki, 2007. "Testing for volatility spillover between the British pound and the euro," Research in International Business and Finance, Elsevier, vol. 21(2), pages 161-174, June.
    4. Malik, Ali Khalil, 2005. "European exchange rate volatility dynamics: an empirical investigation," Journal of Empirical Finance, Elsevier, vol. 12(1), pages 187-215, January.
    5. Tully, Edel & Lucey, Brian M., 2007. "A power GARCH examination of the gold market," Research in International Business and Finance, Elsevier, vol. 21(2), pages 316-325, June.
    6. Capie, Forrest & Mills, Terence C. & Wood, Geoffrey, 2005. "Gold as a hedge against the dollar," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 15(4), pages 343-352, October.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    MGARCH-DCC; gold; Euro; Pound; US Dollar; Japanese Yen; Malaysian Ringgit; Canadian Dollar;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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