Spillover Effects Between Energy and Precious Metals Markets: a Dccgarch Approach Based on Wavelet Coherence Analysis

Abstract

In this study, using daily return data between October 1, 2012, and June 4, 2024, the volatility spillovers between energy commodity markets and precious metal markets are investigated using the Dynamic Conditional Correlation approach based on wavelet coherence Analysis, which allows for the analysis of relationships between markets in time-frequency space. According to the findings of the wavelet coherence analysis, a long-run, mostly positive interdependence effect was observed from Brent oil returns to gold, silver, and platinum returns, as well as a long-run interdependence effect from palladium returns to natural gas returns. In the dynamic conditional correlation analyses for the identified long-run investment cycles, conditional correlation and volatility persistence findings are obtained for each investment cycle. The findings are significant for investors with long-term investment horizons.