An analysis of the volatility of precious metals - Free Essay Example

Sample details Pages: 8 Words: 2292 Downloads: 2 Date added: 2017/06/26 Category Uncategorized Essay Type Analytical essay Did you like this example? The article on commodities has focused on price co-movements and their roles in conveying information about the macroeconomic. The gold and silver are those precious metals that mainly focused by the existing research. The previous research do not examine precious metals shock and volatility cross effects, therefore there is a main weakness if one considers such applications as hedging. Don’t waste time! Our writers will create an original "An analysis of the volatility of precious metals" essay for you Create order There are three objective of study this article. The board objective of study this article is to analyze the conditional volatility and the correlation dependency and interdependency for the four major precious metal, they are gold, silver, palladium and platinum. Besides that, the second objective is to analyze the volatility feedback causes between the US dollar exchange and the four precious metal. The writer expect that the metal volatility will be higher if the US dollar is weaker. And the third objective is to derive the implications of the approximate results on variances and covariances for set up optimal portfolio designs and hedging strategies. 2.Review of the Literature The research of industrial is more ample on analyze their co-movement and the information transmissions if compare illustrating their volatility and correlation dependency and interdependence. According to McKenzie et al. (2001), that the asymmetric effects are not present and the model did not provide an adequate explanation of the data. Tully and Lucey(2007) agreed that the exchange rate is the main macroeconomic variable that will impact the golds volatility, however few other macroeconomic variable had an impact. Besides that, Batten and Lucey (2007) using intraday (high frequency) and interday data in order to analyze the gold futures contracts volatility that traded on the Chicago Board of Trade. Garman and Klass (1980) have analyze the volatility properties of the future returns by the univariate GARCH model and the alternative nonparametric Garman-Klass volatility range statistic. Furthermore, That palladium, platinum, copper and gold futures have chaotic str uctures is agree by Yang and Brorsen (1993). The volatility in the prices of nine non-oil commodities, such as gold and silver, to volatility in oil prices have compared by Plourde and Watkins (1998). 3. Data Description From January 4, 1999 until November 5, 2007, we investigated the four main precious commodity closing spot prices ,exchange rate of U.S. dollar and the federal funds rate. The COMEX in New York have traded the gold (GOLD), silver (SILV), palladium (PALL), and platinum (PLAT) and their entire price are measured in US dollars per troy ounce. Since the precious metals, specially gold, are susceptible to geopolitical crises. The precious metal are dissimilar with the oil grades, the statistics has show that the precious metals are not belong to one great pool. Based on the coefficient of variation, if compare with all precious metals prices, the gold price has the lowest historical volatility, in contract palladium price has the highest historical volatility because of the palladiums supply is relatively small. The above-ground supply of gold is more than 10% of its annual demand and production. The gold has an monetary component and it is not used oftentimes in exchange market, the refore the volatility of the gold price is low. Besides that, Gold is known to have notoriously extended bear markets, in opposite silver price is more commodity-driven than gold as its monetary element was gradually phased out. The statistics for the metals returns normally follow those for their prices. Palladium return has the highest historical volatility, it is followed by silver , in adverse gold return has the lowest if compare with the four metals. When the market is up, silver is performs better than gold, however when then market is down the silver does worse. In term of historical return means, the precious metal that highest average return is platinum, followed by silver, in contrary gold and palladium have the lowest averages in return. The historical return correlation between palladium and platinum is the highest compare with all precious metals and it is positive, followed by the correlation between returns of gold and silver. In opposite, the lowest correla tion is between gold and palladium and it is positive. There is a distinct strong correlation between gold and platinum. The change in the federal funds rate has a inverse correlation with those precious metals, same as the exchange rate. 4.Methodology We used the VARMA-GARCH model in order to concentrate on interdependence of conditional variance and correlation among the precious metals and the exchange rate. Furthermore, we have using vary types of GARCH models to analyze the hedging strategies for the bullion market. Besides that , we also have used Multivariate Dynamic Conditional Correlation GARCH model (DCC-MGARCH) in order to use it to inspect on the dynamics of the first model. 5.Empirical Results 5.1. Model I(VATMA-GARCH): The Four Precious Metals This VARMA-GARFCH Model 1 is for focus on the four precious metal in presence of geopolitics. Own shock volatility The different precious metals have vary degree of news sensitivity. The four precious metal have separated into two groups because of the news-oriented result: the gold and palladium are dropped into the high news-sensitivity group, and the silver and platinum have dropped into the low news-sensitivity group. The gold is very sensitive to news, it is because gold is the most concerned metal by the traders and policy makers. In contrast, the platinum has the lowest shock sensitivity, maybe is because it is expensive. The investor who are favor volatility should focus on the first group, and those who are more disfavor volatility should be concentrate in second group. Own volatility dependency The result have reflex that the precious metals are normally more impact by common fundamental factors than by shock. The silver and platinum are placed in the high volatility sensitivity group, in opposite gold and palladium are in the low volatility sensitivity group. The gold is comparatively less sensitive to macroeconomic variable in long run, due to its large supply of above-ground. The silver is more influenced by macroeconomic factors than gold, therefore silver is more commodity-driven then gold. If investors added the gold into the portfolio, it is possible to increase the volatility in short term but not in long term, because of its short run sensitivity to news. In contrast , in long term due to its long run above-ground supply may smoothes the fluctuations. Short-run shock interdependency The cross shock effects among all four precious metals are limited, due to the precious metal are not belong to one great pool. When there is shocks to palladium, the platinum volatility will be cool off, it is maybe because of they both are substitutes in industrial production. If there are a shock to the gold, the gold will impact positively to the silver. Furthermore, gold and silver are also used in jewelry industry, therefore the investment portfolios of gold and silver can be a safe havens. Long-run volatility interdependency The long-run cross shock affects of cross past volatility are significant to all precious metals. Gold metal is the most sensitive to long-run volatility interdependence with respect to other metal. Gold have the strongest cross volatility spillover affect on those on those other metals, it is because of the gold are used in jewelry industry and it is a part of international reserve, in contrast, other metals are used in substantially in industrial uses. The strong interdependence with gold is maybe is due to its vast above-ground supply and the gold is close relationship with the dollar. Besides that, gold are most being concerned by those traders. Silver and platinums past volatilities are offset each others current volatility, that mean they are negatively impact by common fundamental factors. Therefore, silver and platinum may not be included in a portfolio that are purposes to reducing volatility in long run. Geopolitics Those metals are sensitive to the geopolitical events, such as the 2003 Iraq war was slightly elevated the mean returns of both gold and silver as a result of flight to safety, in opposite, platinum and palladium are not show the same flight to safety in the war. Silver was responded positively to this war, while platinum and palladium are responded negatively in the long run. That mean traders of those metals are hedge diverse against volatility caused by geopolitics. Constant condition correlations (CCC) All the CCC between those precious metals return are positive. The highest CCC is between the platinum and palladium, the two metals are also used in the same industries. The second highest CCC is between the gold and silver, and both metals are the most diffusely traded among the precious metals. Besides that, both metals are also used in jewelry. In contrast, the lowest CCC is between the gold and palladium, gold is the mopt traded metal, while palladium are the least traded metal. 5.2. Model II (Expanded VARMA-GARCH): Precious Metals and Exchange Rate The expanded volatility system has included the exchange rate of dollar and the precious metals, exclude palladium. Palladium is excluded is because of three reasons. First, it have a very small annual production if compare to gold and silver. Second, it is not widely traded in the world. Lastly, it is because the VARMA-GARCH did not converge when palladium was added to other three metals. Gold is a metal that highly sensi tive monetary policy and the change in the exchange rate. The gold and the platinum are the highest in this cross exchange rate volatility, that mean that there are economic fundamental factors are related to the exchange rate volatility that intensify the volatility of precious metals. Gold has the strongest cross reversal impact, while silver and platinum have lower but also similar effect. Besides that, golds past volatility have intensify the exchange rate volatility. The gold and US dollar are integral part of international foreign reserve of central bank, gold is also first safe haven for US dollar. Those monetary policy makers are think about the gold is a harbinger of inflation. The 2003 Iraq war have impact on the both metal returns and volatility significantly. The silvers average return is the most affected, while the platinum return is impacted the least. Besides that, the war have increase the volatility of the three precious metals as well as US dollar volatility. T he gold volatility is affected most, while the platinum is the least. FRR as a monetary policy variable in the system decrease the metal volatility, it is because of the metal-to-metal volatility are modified by the metal-to-exchange rate volatility despite the strong volatility to the exchange rate from those metals. 5.3. Model III (VARMA-DCC): The Four Precious Metals This Model III is to justify on the dynamics of the Model I. 5.4. Model IV (Expanded VARMA-DCC): Precious Metals and Exchange Rate The restricting the shock and the volatility spillovers are do not impact the own shock effect much, however it have mixed effects on the own volatility spillovers. Besides that, the Model IV is to justify on the dynamics of the Model II. 6. Implications for Portfolio Designs and Hedging Strategies There are example for constructing a optimal portfolio and hedging strategic for precious metals. The first example is follows Kroner and Ng (1998) by a portfolio that can reducing the risk but did not lowering the expected return of the portfolio. For example, there are a suggestion that optimal holding gold by holding portfolio that include gold and silver, the portfolio of gold in one dollar should be 81cents for gold, and 19 cents for silvers. This optimal portfolio weight advise that traders should hold more gold than silver and also other precious metals in order to reduce the risk without reducing the expected return, because the CCC of the gold and silver are the second highest. Besides that, they also suggest that investors should hold more platinum than silver ,should be 40% for platinum and 60% for silver in their portfolio. It is because these two metals are not highly correlated. Furthermore, when come to platinum and palladium, the optimal portfolio should be 83% for platinum and 17% for palladium in favor of the exotic metal over the dull one, it is because platinum and palladium are the highest correlation among four precious metals. Besides that, in purpose of set a optimal portfolio, we also can follow example that given by Kroner and Sultan (1993) about risk minimizing hedge ratios and put it for our precious metals. In purpose of minimize the risk, a long position of one dollar is taken in a precious metal should be also hedged by a short position in another precious. According the research, the values of hedge ratio for those precious metals are lower than those for stock market. By using this strategy, one dollar buy in gold should be shorted by about 19 cents of silver. This result have show that it is more effective to hedge long gold positions by shorting palladium, it is because gold and palladium are the lowest CCC among all the pairs of precious metals. In contrast, the least effective strategy to hedge is hedging long platinum position and also to short palladium, it is because the CCC between platinum and palladium are the highest if compare with any other pairs of precious metals. That mean results show that hedging is more effective when the long position in a precious metal and hedge with short position in another precious metal that is not closely related to the first one precious metal. Besides that, there are optimal portfolio weight and hedging ratios for the three metals exclude palladium and also exchange rate in presence of monetary policy and geopolitics are given. The portfolio gold/dollar has the highest weight for the gold if compare with the three other precious metals, in adverse the silver/dollar portfolio has the lowest weight. It is because the gold is considered as the safest haven against fluctuations in the dollar, while the silver does not have enough variation benefit, such as gold and platinum. 7. Conclusions

The Positive And Positive Implications Of Freedom Of Speech

Introduction Over the years, the administrations guarantee of the right to speak freely has been giving the American people voices and privilege to be heard without fear of punishment. This began with the First Amendment of the Constitution when the law that allows every citizen the right to speech was enacted (Mason Stephenson, 2015). The idea behind freedom of speech was to ensure every person had the right to voice his/her thoughts or opinions. Enabling people to say their view is crucial to the development of the society as has been witnessed in the United States. The United States is considered as one of the most democratic nations due to many reasons including the residents’ freedom of speech and freedom of the press. Because of†¦show more content†¦As is ascribed in the constitution, every individual in the country has indispensable rights that should not be constrained in any way. The First Amendment stated that Congress should not enact laws that restrict the freedom of speech in any manner (Mason Stephenson, 2015). However, federalism has on many occasions put power where it ought not to be. Looking at many cases in the country, it is seen that federalism gives the national and state authorities control over their respective spheres of influence. Since the establishment of the Constitution, there have been negative and positive impacts of federalism on freedom of speech throughout history. One positive impact of federalism on free speech is that it ensures democracy through increased citizen participation. In a federal government, there is a division of power of the government into several units. Such an administration promotes freedom of speech as citizens are allowed to say what they think about different aspects of governance. This democracy allows the public to criticize government entities that are not performing their jobs correctly without fear of being punished (Mason Stephenson, 2015). It had also enabled people to track the delivery of promises made in manifestos of governments when the leaders were asking to be elected. Promotion of democracy is crucial forShow MoreRelatedModern Liberalism: Rousseau ´s Theory of Freedom894 Words   |  4 PagesFreedom is a difficult doctrine that takes part in politics. Philosophy emphasized entirely determined by public, particularly in sociology and economics. Liberty can clarify the distinction between negative and positive liberty, the following part of this essay covers two issues. Meanwhile, the second purpose in this essay is to explore the implication of negative and positive freedom on the relationship between the individual and the states which will utilize different real instance in the worldRead MoreThe Rights Of The United States1219 Words   |  5 Pagesaffairs, but it is our purpose to address the violation of the citizen’s right to Freedom of Expression. It is absolutely necessary to define the concept of Freedom of Expression so the implications of certain issues, which are often related with this term, can be analyzed. The meaning behind the words freedom of speech basically aims to guarantee the right to freedom of opinion and expression; and this includes freedom to hold and spread opinions without any kind of interference or retaliation. OneRead MoreTerrorism And The Social Media1719 Words   |  7 Pagesrecommends among other things to â€Å"convene regional and national dialogues on preventing violent extremism with a range of actors, encompassing youth engagement, gender equality, the inclusion of marginalized groups, the role of municipalities, and positive outreach through social media and other virtual platforms.† The calculating messages of extremists on social media have attained substantial success in attracting people, particularly young men and women into their organizations. While extremistsRead MoreGood News Club v. Milford Central School995 Words   |  4 Pagesa school may open their doors to public use and allows the school board to adopt their own regulations for governing their facilities. The respondent, Milford Central School, adopted 7 policies for facility use, and specifically two, which had implications in the case. (1) District residents may use the school for â€Å"instruction in any branch of education, learning, or the arts.† (2) The school is available for use â€Å"provided that such uses be non exclusive and shall be opened to the general publicRead MoreEuthanasia Essay893 Words   |  4 PagesEuthanasia is a highly emotive issue, which is habitually avoided contemplation because it deals with unsettling issues people often choose to disregard. It is exceptionally difficult for people to converse about grave illness and its implications, which is undoubtedly why so many people are left unaware of why this issue is so significant. The increasing number of grave diseases emphasises the magnitude of this issue. 1 out of 5 people have or will develop cancer in thisRead MoreDesensitization From Lack Of Discretion1614 Words   |  7 PagesCorruption While censorship is a topic of hot debate what’s important to remember is it shouldn’t be fueled by opinion. The risks of not paying this debate appropriate attention could be the rise of a tyrannical government, loss of freedoms such as our freedom of speech and our freedom of press, and a stronger presence of authority in our lives on the one side. On the other side our country’s moral fabric could come apart, there could be a rise in violence, and the innocence of our children is at risk. ItRead MoreEssay on Cyber Attacks1182 Words   |  5 Pagesand find out about other companies over the internet. Reviewing Secretary Clinton’s speech on internet freedom I was in the middle as to whether the mission she had outlined to ensure internet freedom to all was considered war. On one side of the spectrum I viewed this speech as merely a suggestion to other countries and citizens as to what internet freedom is. On the other end of the spectrum I looked at the speech as Clinton imposing her views to everyone else. She did this by saying that her internetRead MoreAppraisal for Democracy by Plato, Aristotle and Thucydides1743 Words   |  7 Pagestwo individuals. According to Aristotle, the main aim of democracy was ensuring freedoms among the citizens. He suggested that the most important aspect of a man’s life was the ability to have a say in what surrounded him. He continued to imply that man would always to be in control of the environment, especially on matters of who is to rule whom. For these reasons, he felt the need for an appropriate sharing of freedoms so that man can enjoy what he loves a lot. Aristotle holds to the notion thatRead MoreSchool Uniforms: Should They Be Required in Public Schools? Essay925 Words   |  4 Pagesparents and school staff think that uniform policies should be enforced, as they feel it provides a sense of safety, structure, a lack of ridicule and modesty to our children. On the other hand, there are parents that argue that it takes away a child’s freedom of expression, independence, free spirit and individuality. Both parties have good and effective arguments and I hope to provide insight into this subject, so that you can gather current and valid information. There are many dangers that childrenRead MoreCritical Analysis Of Incidents In The Life Of A Slave Girl By Harriet Jacobs1355 Words   |  6 Pagesis evil and no good can be associated with it. Jacobs shows that slavery by its very nature extinguishes the morality and ethical values of slaveholders. Likewise, she highlights on the physical, psychological, health, social, and mental adverse implications of the slavery systems to the victims. Contrary, the seventh Vice-President of the United States of America and longtime Senator John C. Calhoun propagates on the significance of the slavery institution citing the benefits to the slaveholders and

Walt Disney World Free Essays

Hidden from the general public, deep in the bellies of Walt Disney World, under the Cinderella Castle is where the famed Disney Operational Command Center. In this technological wonder, the underground bunker handles over 30 million annual visitors. It is a true art form when come to how the megaresort, Disney World conduct its crowd control during the busiest times of the year. We will write a custom essay sample on Walt Disney World or any similar topic only for you Order Now Yet, the theme park operators must figure out how to speed up the pace even more. In a world of short attention spans created by video games and smartphones, the general park visitors has a culture cultural shift toward impatience. To stay ahead of these new forms of virtual competition, Disney has to evolve its information systems. Information systems improve operation at Disney in two main ways. First, it increases efficiency of existing processes by automating steps that were manual. The command center uses video cameras, computer programs, digital park maps and other cutting edge tools to automatic spot gridlock before it forms and alerts the command center operators in real time in green, yellow and red outlines. If route of Pirates of the Caribbean, the famed ride that inspired four major motion pictures on the screen changes from green to yellow, the center could respond by alerting the on duty managers to launch more boats. Also, information technology enable entirely new processes that are capable of transforming the business by change flow of information replace sequential steps with parallel steps and eliminate delays in decision making. When the line become super congested, the command center has an option involves dispatching the likes of Captain Jack Sparrow or Goofy to the queue to entertain the patrons as they wait. To alleviate mobs, the command center can summon a miniparade called â€Å"Move it! Shake it! Celebrate It! † into the less concentrated areas to siphon mass from the formed mob. To take advantage of the situation, other technicians in the command center dispatch additional workers to the surrounding restaurants to open additional registers, and greeters to hand out menus to people waiting in line. Disney is not in a position to expand the park and the park holds only so many people at one time. This means Disney must increase revenue by adding to the customer experience. Because of long waits and crowds, in the past the average Magic Kingdom visitors has had time for only 9 rides out of more than 40. In the few month after the arrival of fully functional command center, the information system managed to lift that average to 10 (Barnes). Disney provides customers with many applications for hand held devices. For example, Mobile Magic, a $1. 99 app, allows visitors to locate on site Disney mascots and receive directions to where mascots are heading and signing autographs. It will also shows where the nearest restaurant with the shortest wait is near. If I am a business or MIS manager at Disney World, I will use an application for video, digital or a mobile device that would help Disney visitors to upload personal pictures and share with each other to create a mini community during their magical vacations. How to cite Walt Disney World, Papers