Dependence between the global gold market and emerging stock markets (E7+1): Evidence from Granger causality using quantile and quantile-on-quantile regression methods

This study examined the dependence between gold and stocks during 2002-18 in seven emerging countries. The study combined the bivariate cross-quantilogram introduced recently with quantile-on-quantile regression (QQR) approaches to conduct comprehensive and complementary analyses. The QQR results for the full sample revealed a weak positive dependence in all the quantiles of gold and stock returns across all the countries selected during mild market conditions. The results for pre and post-crisis periods largely were consistent with those obtained for the full sample, except for Turkey (pre-crisis), and China and Indonesia (post-crisis). The results of the causality test-in-mean (return) and that of the causality test-in-variance revealed no causal relation between stock and gold in the pre-crisis period, while causality ran only from gold to some stocks in the post-crisis period. Further, while there was volatility causality running only from gold to stocks during the pre-crisis period, the volatility causality between the two markets was very high during the post-crisis period. Therefore, we suggest that gold may have been a hedge for stocks during the pre-crisis compared to the post-crisis period. Further, international risk factors should be considered in optimal investment decisions between domestic and global markets' assets (stocks and gold).