Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/110846 
Year of Publication: 
2015
Series/Report no.: 
CESifo Working Paper No. 5333
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We employ a wavelet approach and conduct a time-frequency analysis of dynamic correlations between pairs of key traded assets (gold, oil, and stocks) covering the period from 1987 to 2012. The analysis is performed on both intra-day and daily data. We show that heterogeneity in correlations across a number of investment horizons between pairs of assets is a dominant feature during times of economic downturn and financial turbulence for all three pairs of the assets under research. Heterogeneity prevails in correlations between gold and stocks. After the 2008 crisis, correlations among all three assets increase and become homogenous: the timing differs for the three pairs but coincides with the structural breaks that are identified in specific correlation dynamics. A strong implication emerges: during the period under research, and from a different-investment-horizons perspective, all three assets could be used in a well-diversified portfolio only during relatively short periods.
Subjects: 
financial markets
time-frequency dynamics
gold
oil
stocks
high-frequency data
dynamic correlation
financial crisis
wavelets
JEL: 
C01
C13
C58
F37
G11
G15
Document Type: 
Working Paper
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