Do Diamond Stocks Shine Brighter than Diamonds ?

This paper addresses two practical investment questions: Is investing in the diamond equity market a more feasible and liquid alternative to investing in diamonds? Additionally, is diamond equity affected by polished diamond prices? We assemble an original database of diamond mining stock prices traded on main stock exchanges in order to assess their relationship with diamond prices. Our results show that the market of diamond-mining stocks does not represent a valid investment alternative to the diamond commodity. Diamond equity returns are not driven by diamond price dynamics but rather by local market stock indices.


Introduction
Diamonds are emerging as a new investment asset, providing great opportunities for trading, investing and diversification.Hedge funds and financial intermediaries have shown increased interest in the market and recent available data allow us to study its features and dynamics.However, the lack of a standardization system for the diamond commodity prevented the existence of an exchange regulated trading platform for diamonds, leaving diamond-mining companies' stocks as the unique officially tradable asset of the diamond industry.Over the last decade, diamond stocks have been considered as a promising financial asset for investors' portfolios according to finance professionals (Carlin 2017;McKeough 2015;Sizemore 2015;Cameron 2014), though, to our best knowledge, neither academic scholars nor industry professionals have tested this hypothesis.
A diamond-based financial index has not yet emerged as a tradable asset on official exchanges.Commercial experts have been planning to introduce diamond derivatives that could be used to hedge risk in the diamond market; nevertheless, no such product has been launched on official exchanges until the present moment.
In this paper we study the sensitiveness of diamond-mining companies' stocks to diamond prices in order to examine whether they could be a good alternative investment exposure to the diamond market, while still fulfilling the condition of market liquidity.In such a case, the behavior of diamond stock prices would be driven by the diamond market dynamics and would not be influenced by the idiosyncratic risks of the stock markets where they are traded.More precisely we try to give an answer to the following research questions: are diamond mining stocks a good substitute to investing in a diamond-based financial asset?Do they correctly represent the dynamics of the diamond market?
We use the entire set of international diamond stock prices firstly to analyze their statistical features and dynamics and then to test their dependence on diamond prices using the standard CAPM approach (Tufano 1998).

The Market of Diamond Mining Stocks
Diamond mining companies are involved in two major activities of the diamond value chain: exploration and mining.In the exploration phase companies search for diamondiferous kimberlitic rocks, which could represent possible viable sources of diamonds.They do so by testing the ground for changes in the magnetic field.The mining process consists of diamond ore's extraction from kimberlitic pipes using different techniques, such as open-pit mining, underground mining, alluvial mining and marine mining, depending on the origin and location of kimberlites.
Upon mining, diamond ore goes through several stages of crushing and processing in order to extract rough diamonds from it.A very small amount of diamond ore consists of diamonds, as less than 1% of it represents the material with a concentration of diamonds.
The majority of the global diamond reserves 1 are concentrated in Russia, which represents the largest producer of rough diamonds by volume (Figure 1).Russia declared diamonds to be of strategic importance and all mining companies and their exploration processes are, at least partly, state-owned with free access to all country regions.The mining conditions are, however, extremely severe and a large portion of these diamond resources remains unexploited.Africa is the richest world region in Current diamond reserves are divided into projects and mines, owned by different diamond mining companies.The overall diamond mining sector represents the part of the diamond industry value chain that has been achieving the highest profit margins, as reported in Figure 2. Despite the fact that many international and local companies are involved in the diamond exploration and mining industry, the market is driven by the top five industry players: Alrosa, De Beers, Rio Tinto, BHP Billiton and Dominion Diamond.These five companies accrued 78% of the industry's revenues in 2012 (Bain and Company, Antwerp World Diamond Center 2013).In 2013 BHP Billiton sold its diamond business to Dominion Diamonds, bringing the number of players to four.
Alrosa is the largest diamond volume producer, based on the number of diamond carats produced (Figure 3).De Beers, who had the monopoly of the industry until 2003, is now owned by Anglo American and remains the largest rough diamond producer in value terms as shown in Figures 3 and 4.This advantage is not unattainable for others, as several competitors are Current diamond reserves are divided into projects and mines, owned by different diamond mining companies.The overall diamond mining sector represents the part of the diamond industry value chain that has been achieving the highest profit margins, as reported in Figure 2. Current diamond reserves are divided into projects and mines, owned by different diamond mining companies.The overall diamond mining sector represents the part of the diamond industry value chain that has been achieving the highest profit margins, as reported in Figure 2. Despite the fact that many international and local companies are involved in the diamond exploration and mining industry, the market is driven by the top five industry players: Alrosa, De Beers, Rio Tinto, BHP Billiton and Dominion Diamond.These five companies accrued 78% of the industry's revenues in 2012 (Bain and Company, Antwerp World Diamond Center 2013).In 2013 BHP Billiton sold its diamond business to Dominion Diamonds, bringing the number of players to four.
Alrosa is the largest diamond volume producer, based on the number of diamond carats produced (Figure 3).De Beers, who had the monopoly of the industry until 2003, is now owned by Anglo American and remains the largest rough diamond producer in value terms as shown in Figures 3 and 4.This advantage is not unattainable for others, as several competitors are Despite the fact that many international and local companies are involved in the diamond exploration and mining industry, the market is driven by the top five industry players: Alrosa, De Beers, Rio Tinto, BHP Billiton and Dominion Diamond.These five companies accrued 78% of the industry's revenues in 2012 (Bain and Company and Antwerp World Diamond Center 2013).In 2013 BHP Billiton sold its diamond business to Dominion Diamonds, bringing the number of players to four.
Alrosa is the largest diamond volume producer, based on the number of diamond carats produced (Figure 3).De Beers, who had the monopoly of the industry until 2003, is now owned by Anglo approaching the levels of De Beers' diamond value sales.For instance, while De Beers in 2012 held 37% of the overall rough diamond value sales, while Alrosa's share of the market was 30%.

Methodology
The aim of this work is to investigate the relationship between diamond mining stocks and the price of the diamond commodity.For this purpose, we study statistical features and dynamics of stock prices in levels and log returns by firstly testing for stationarity using the ADF test.We then test the occurrence of structural breaks, using the Bai-Perron (Bai and Perron 1998) test.We further employ the ARCH LM test to examine the presence of heteroscedasticity in log returns.In the case of volatility clustering, we estimate the time-varying conditional variance for each return series by choosing among ARCH, GARCH, TARCH or E-GARCH volatility models (Engle 1982; Nelson approaching the levels of De Beers' diamond value sales.For instance, while De Beers in 2012 held 37% of the overall rough diamond value sales, while Alrosa's share of the market was 30%.

Methodology
The aim of this work is to investigate the relationship between diamond mining stocks and the price of the diamond commodity.For this purpose, we study statistical features and dynamics of stock prices in levels and log returns by firstly testing for stationarity using the ADF test.We then test the occurrence of structural breaks, using the Bai-Perron (Bai and Perron 1998) test.We further employ the ARCH LM test to examine the presence of heteroscedasticity in log returns.In the case of volatility clustering, we estimate the time-varying conditional variance for each return series by choosing among ARCH, GARCH, TARCH or E-GARCH volatility models (Engle 1982;Nelson  Other is estimated assuming no price change for the players of this segment.E is an estimate.In order to estimate average price per carat sold, total value of diamonds sold is divided by total volume of diamonds sold.Source: (Bain and Company and Antwerp World Diamond Center 2018).

Methodology
The aim of this work is to investigate the relationship between diamond mining stocks and the price of the diamond commodity.For this purpose, we study statistical features and dynamics of stock prices in levels and log returns by firstly testing for stationarity using the ADF test.We then test the occurrence of structural breaks, using the Bai-Perron (Bai and Perron 1998) test.We further employ the ARCH LM test to examine the presence of heteroscedasticity in log returns.In the case of volatility clustering, we estimate the time-varying conditional variance for each return series by choosing among ARCH, GARCH, TARCH or E-GARCH volatility models (Engle 1982;Nelson 1991).
To study the relationship existing between diamond equity prices and diamond prices we use a time varying correlation approach using the DCC-GARCH model (Engle 2002), and the standard CAPM approach presented in Tufano (1998).

Data
The database used in this research, composed of price series of diamond mining stocks, has been collected by the authors following thorough background research and represents an original contribution of the paper.It includes daily prices of all companies (21) involved in the diamond-mining sector and traded on different exchanges.It is, to our best knowledge, the only database of diamond-mining companies' stock prices that are traded regularly.
The information on diamond prices are provided by the polished diamond price indices developed in D'Ecclesia and Jotanovic (2018), following a proprietary basket index methodology.In order to account for the different features of diamond prices due to differences in their quality, we use the Mid-range Diamond Index-MDI-corresponding to polished diamonds of mid quality, and the Higher-range Diamond Index-HDI-corresponding to polished diamonds of higher quality.The dynamics of the two indices are reported in Figure 5. 1991).To study the relationship existing between diamond equity prices and diamond prices we use a time varying correlation approach using the DCC-GARCH model (Engle 2002), and the standard CAPM approach presented in Tufano (1998).

Data
The database used in this research, composed of price series of diamond mining stocks, has been collected by the authors following thorough background research and represents an original contribution of the paper.It includes daily prices of all companies (21) involved in the diamond-mining sector and traded on different exchanges.It is, to our best knowledge, the only database of diamond-mining companies' stock prices that are traded regularly.
The information on diamond prices are provided by the polished diamond price indices developed in D'Ecclesia and Jotanovic (2018), following a proprietary basket index methodology.In order to account for the different features of diamond prices due to differences in their quality, we use the Mid-range Diamond Index-MDI-corresponding to polished diamonds of mid quality, and the Higher-range Diamond Index-HDI-corresponding to polished diamonds of higher quality.The dynamics of the two indices are reported in Figure 5. Higher-range Diamond Index The list of the stocks included in the database is reported in Table 1.Stock price data were obtained from Bloomberg and Yahoo Finance data platforms.The time interval of the data varies for each stock due to different Initial Public Offering (IPO) dates.All diamond stock prices are daily real traded closing prices from the date of the company's IPO until 15 February 2019.
The selected diamond stocks fulfill the following criteria: 1.All companies are involved in the process of diamond exploration and mining; 2. All companies are publicly traded on one or more Stock exchanges.
Some of the diamond mining companies are traded on several exchanges with one of the exchanges serving as the flagship market.In such a case we report only the flagship market of the equity.
The biggest player in the industry today, in terms of billions of carats produced, is Alrosa, listed on the Moscow Stock Exchange-MICEX, followed by Anglo American and Rio Tinto.Another important diamond producer, Dominion Diamond, was acquired in July 2017 by a privately held group of mining businesses, The Washington Companies, and since then has operated as a standalone, private company without being listed on any exchange.
In Table 1 we report all the mining companies traded on exchanges whose main business is related to diamond mining activity.The two exceptions are Anglo American and Rio Tinto that mine a wide range of other metals and minerals as well as diamonds.Nevertheless, these two companies represent important diamond producers and an important part of their revenues is linked to diamond mining, as can be detected by looking at their balance sheets.Moreover, Anglo American The list of the stocks included in the database is reported in Table 1.Stock price data were obtained from Bloomberg and Yahoo Finance data platforms.The time interval of the data varies for each stock due to different Initial Public Offering (IPO) dates.All diamond stock prices are daily real traded closing prices from the date of the company's IPO until 15 February 2019.
The selected diamond stocks fulfill the following criteria: 1.
All companies are involved in the process of diamond exploration and mining; 2.
All companies are publicly traded on one or more Stock exchanges.
Some of the diamond mining companies are traded on several exchanges with one of the exchanges serving as the flagship market.In such a case we report only the flagship market of the equity.
The biggest player in the industry today, in terms of billions of carats produced, is Alrosa, listed on the Moscow Stock Exchange-MICEX, followed by Anglo American and Rio Tinto.Another important diamond producer, Dominion Diamond, was acquired in July 2017 by a privately held group of mining businesses, The Washington Companies, and since then has operated as a standalone, private company without being listed on any exchange.
In Table 1 we report all the mining companies traded on exchanges whose main business is related to diamond mining activity.The two exceptions are Anglo American and Rio Tinto that mine a wide range of other metals and minerals as well as diamonds.Nevertheless, these two companies represent important diamond producers and an important part of their revenues is linked to diamond mining, as can be detected by looking at their balance sheets.Moreover, Anglo American owns 85% of De Beers, the previous industry's monopolist and the current leader in diamond production in value (Bain and Company and Antwerp World Diamond Center 2013).The companies listed in Table 1 differ substantially based on their dates of initial public offering (IPO) as well as their liquidity (average volume of transactions).In order to have a robust and reliable dataset for our analysis we selected the stocks that satisfy the following criteria: 1.
Diamonds as the main activity: The company is involved exclusively in diamond mining activities; 2.
Liquidity: The average traded volume of the equity is at least 100,000; 3.
Time series length: The company has been listed on an Exchange since 6 April 2007.
In addition to the chosen companies that satisfy the above criteria we include in the research sample the biggest market players traded on official exchanges-Rio Tinto, Alrosa and Anglo American.These three companies do not satisfy the above criteria, as Rio Tinto and Anglo American remain involved in mining and exploration of other metals and minerals as well as diamonds, while Alrosa only became listed on the Moscow Stock Exchange in 2011.Nevertheless, we believe they can provide us with valuable information due to their high stakes in the industry.
Finally, the following 8 diamond stocks were selected for the analysis: The companies listed in Table 1 differ substantially based on their dates of initial public offering (IPO) as well as their liquidity (average volume of transactions).In order to have a robust and reliable dataset for our analysis we selected the stocks that satisfy the following criteria: 1. Diamonds as the main activity: The company is involved exclusively in diamond mining activities; 2. Liquidity: The average traded volume of the equity is at least 100,000; 3. Time series length: The company has been listed on an Exchange since 6 April 2007.
In addition to the chosen companies that satisfy the above criteria we include in the research sample the biggest market players traded on official exchanges-Rio Tinto, Alrosa and Anglo American.These three companies do not satisfy the above criteria, as Rio Tinto and Anglo American remain involved in mining and exploration of other metals and minerals as well as diamonds, while Alrosa only became listed on the Moscow Stock Exchange in 2011.Nevertheless, we believe they can provide us with valuable information due to their high stakes in the industry.
Finally, the following 8 diamond stocks were selected for the analysis: The 8 selected stocks are traded on Moscow (MICEX), London (LSE) and Toronto Stock Exchanges (TSX).The common time span is 4 June 2007-15 February 2019, while their price dynamics are reported in Figure 6.All 8 companies exhibited a significant price decrease in their values at the time of the Global Financial Crisis of 2008, after which different dynamics for each stock can be observed.Alrosa, Anglo American and Rio Tinto all reported an increasing trend in the last three years while the other five showed a period of high instability (Mountain P. D. and Petra D.), reducing trend (Stornoway D. C.) or constant behavior (Firestone D. and Star D. C.).Firestone Diamonds and Star Diamond Corporation exhibited similar dynamics with no price recovery after the crisis.On the other hand, Mountain Province Diamonds and Petra Diamonds exhibited similar price increases on different occasions, such as during the recovery process in 2010 and then again in 2016.
We further provide additional financial information of the 8 selected companies, reported in Table 2.As reported in Table 2 we observe that Alrosa operates with the highest market to book ratio, implying that the investors are willing to pay a higher price than its actual net asset value.This could be explained by investors' expectations of future profitability of the company supported by its very high Return on Equity (ROE) of around 36%.Moreover, the management of Alrosa has been very successful in reducing the company's debt and retaining good profits at the same time.
Most of the companies involved solely in diamond mining, with the exception of Stornoway D. C., exhibit market to book ratios that are smaller than 1.This signifies that the investors are skeptical about their profitability and growth, valuing them lower than their net asset values.
Growth rates of sales differ noticeably across diamond mining companies in terms of their values but all result positive, in accordance with the expected increase in diamond sales in 2018 (Bain and Company and Antwerp World Diamond Center 2018).On the other hand, asset growth rate results were mostly negative across diamond-mining companies.The reason for this can be found in increased diamond mining, which reduces the value of diamond mines while no new mines are being acquired.Another possible reason for negative asset growth in balance sheets can be found in the reduction of diamond stock due to the increase in sales.
three years while the other five showed a period of high instability (Mountain P. D. and Petra D.)

The Diamond Stock Market
Stock prices are quoted in local currency of the Stock exchange where they are traded.The goal of the paper is not to forecast their dynamics but only to identify whether the drivers of their volatility are governed by the risk factors originating from the global diamond market.We therefore analyze the log returns of each company and study their statistical features.
In Table 3 we firstly report the basic summary statistic for diamond mining stock prices and diamond indices in levels.In Table 4 we report the ADF test statistics for stock price series in levels.In line with the standard features of stock prices, all price series result integrated processes of order 1-I(1), together with the two diamond indices.Following the assumption that stock prices follow a lognormal distribution, we further transform the prices into log-returns and perform the following research studies using this stationary transformation of price data2 .
Bai Perron structural break test results, reported in Table 5, indicate how price dynamics of the various stocks and the two indices are rather different.Several structural breaks occur for each time series in the observed decade but all in quite different dates.Structural breaks in diamond indices seem to be completely unrelated to structural breaks occurring for diamond stock prices.The only exception may be represented by the structural break of the Mid-range Diamond Index occurring on 10 October 2016, which may have caused breaks in Anglo American and Rio Tinto stock price series that occurred in November and December 2016, respectively.The estimation was performed with 0.15 trimming and maximum breaks set to 5 at 5% significance level.The third column reports F statistics for the selected number of breaks, subject to critical values tabulated by Bai and Perron (2003).Source: Elaboration on Bloomberg and Yahoo Finance data.
We also tested the presence of structural breaks by using the improved model suggested by Lee and Strazicich (2003) that allows up to two structural breaks, and obtained similar results 3 .
Stock returns and indices returns result heteroskedastic as shown by the ARCH LM test reported in Table 6.We use a GARCH approach to measure the volatility of each series.The estimated GARCH parameters for each stock and the two indices are reported in Table 7, while the single conditional variances are presented in Figure 7.We estimated the most appropriate GARCH model for each individual time series, choosing among ARCH, GARCH, TARCH and E-GARCH.We determined 3 Results can be obtained upon request.our choice for the most appropriate model for each series by contemplating the values of Akaike and Shwarz information criteria, after estimating all possible models on each series.Mid-range Diamond Index -E-GARCH annualized conditional variance

Diamond Stocks vs. Diamond Prices
Diamond stocks and diamond indices do not show similar dynamics in levels; Moreover, their returns show structural breaks occurring at different dates, not providing evidence that a common driver may explain diamond stocks volatility.We further investigated the relationship between diamond stock returns and the two diamond indices by estimating the Dynamic Conditional Correlation-E-GARCH (1,1) over the studied period.The choice of the model was based on the Akaike information criterion.The DCC-E-GARCH approach allows measuring the short-run not driven by diamond prices but rather by other factors related to the book values of the companies.In addition, one possible explanation for the lack of correlation found between stock prices and diamond indices may be explained by the fact that polished diamonds are not a direct output of the mining companies.Rough diamonds pass through several value chains before they reach the polished diamond market and the prices for rough diamonds are only available with a monthly frequency.Hence, a different approach must be used to test any possible dependence.Mountain Province Diamonds -Higher-range Diamond Index    We further test a possible relationship between the diamond stock prices and the diamond indices using the multifactor approach presented in Tufano (1998), where the author tests how firms engaged in gold mining can be affected by the price of gold.In this paper we analyze the risk exposure of the share returns of the eight firms engaged in diamond mining to changes in the price of diamonds (or their returns).
Managers and investors express share price exposure to the input prices in terms of elasticities; for each percentage change in the input prices they estimate that mining shares would change by 2 to 10 percent, due to financial and operating leverage.These predictions can be confirmed by estimating a multifactor market model, as in Jorion (1990).To estimate the exposure of diamond mining firms to diamond prices, we developed the following market model: R s,it = α it + β 1 R m,it + β 2 R d,it + ε it where R s,it -measures the daily return of stock i at time t; R m,it -measures the daily return of regional market stock index i at time t; R d,it -measures the daily return of diamond index i at time t; For the regional market stock index, we chose the most important market index built in each exchange we analyzed.The coefficients β 1 and β 2 represent the sensitivity of stock i's return for a 1 percent return to holding diamonds, after controlling for movements in broad equity indices that affect the return on these stocks independent of diamond price movements.
In order to obtain unbiased beta estimates, we used the approaches suggested by Dimson (1979), as corrected by Fowler and Rorke (1983), and calculated five sets of diamond and market betas for each diamond mining firm over the entire sample period.These sets of betas differed by the method of adjustment.The adjustments used one lead and one lag term, as adding more than one lead or lag term does not significantly change the measured mean betas.The diamond mining stock returns exhibit the ARCH effect (Table 6) and, hence, we estimated two regressions for each stock using GARCH.The three different stock indices chosen for each of the exchanges we are studying are: 1.
FTSE 100 Index, corresponding to London Stock Exchange.
The estimated coefficients from the GARCH mean equations are reported in Table 10.It is interesting to notice that diamond stock returns results were only affected by their respective stock market indices.The Higher-range or the Mid-range diamond indices do not have any role in the diamond stock returns.This provides further support to the previous result showing that shares of firms engaged in diamond mining cannot be used as an alternative to diamond investments and, therefore, cannot be used as a safe haven.

Concluding Remarks
Diamonds represent the last hidden commodity that was long neglected by the financial world, given the lack of its fungibility and price transparency.The recent financial crisis encouraged investors to look for alternative assets to protect their portfolios.This brought financial attention to diamonds, which were perceived as a possible new investment asset and eventually viewed as a hedge or a portfolio diversifier.Given that a tradeable diamond financial derivative is still not traded on a regulated exchange, in order to study the potential role of diamonds in the investment context we analyzed the shares of firms engaged in diamond mining.We verified whether they can be a potential liquid substitute to investing in diamonds.We collected a unique dataset of stock prices of all 21 diamond mining companies which are traded on official stock exchanges and studied their price dynamics and possible relationship with diamond prices.For this purpose, we used the Mid-range and Higher-range diamond basket indices built by D'Ecclesia and Jotanovic (2018) as a proxy for the diamond market prices.We then analyzed the relationship between diamond mining stock prices and diamond prices by examining their long-term conditional correlations.Moreover, we also estimated a multifactor market model to verify a possible influence of diamond prices on diamond stock returns.We found that stock returns are only exposed to stock market index returns.
The results show that diamond stocks are not affected by diamonds price dynamics and are not correlated with the diamond market indices.
This paper represents a first step in the scientific analysis of the diamond stock market and leaves plenty of scope for further research.We hope that the original database of diamond mining stocks presented in this article will encourage scholars and facilitate future research in the field.

Figure 1 .
Figure 1.Annual rough diamond production by country in billions of U.S. dollars (2013-2018). Notes: The figure presents annual rough diamond production by country in billions of dollars.Only diamonds tracked by Kimberley Process are included.2018 data is preliminary estimate.DRC is Democratic Republic of the Congo.Source: (Bain and Company, Antwerp World Diamond Center 2018).

Figure 2 .
Figure 2. Profit margins of the diamond value chain in 2017.Notes: The figure presents profit margins of the mining value chain in 2017.The analysis of exploration and production is based on data for ALROSA, De Beers Group, Rio Tinto, Dominion Diamond Mines, Petra Diamonds.The analysis of large chains is based on data for Chow Sang Sang, Chow Tai Fook, Gitanjali Jewels, Lukfook, Signet Jewelers, Tiffany & Co., Titan Company.Source: (Bain and Company, Antwerp World Diamond Center 2018).

Figure 1 .
Figure 1.Annual rough diamond production by country in billions of U.S. dollars (2013-2018). Notes: The figure presents annual rough diamond production by country in billions of dollars.Only diamonds tracked by Kimberley Process are included.2018 data is preliminary estimate.DRC is Democratic Republic of the Congo.Source: (Bain and Company and Antwerp World Diamond Center 2018).

Figure 1 .
Figure 1.Annual rough diamond production by country in billions of U.S. dollars (2013-2018). Notes: The figure presents annual rough diamond production by country in billions of dollars.Only diamonds tracked by Kimberley Process are included.2018 data is preliminary estimate.DRC is Democratic Republic of the Congo.Source: (Bain and Company, Antwerp World Diamond Center 2018).

Figure 2 .
Figure 2. Profit margins of the diamond value chain in 2017.Notes: The figure presents profit margins of the mining value chain in 2017.The analysis of exploration and production is based on data for ALROSA, De Beers Group, Rio Tinto, Dominion Diamond Mines, Petra Diamonds.The analysis of large chains is based on data for Chow Sang Sang, Chow Tai Fook, Gitanjali Jewels, Lukfook, Signet Jewelers, Tiffany & Co., Titan Company.Source: (Bain and Company, Antwerp World Diamond Center 2018).

Figure 2 .
Figure 2. Profit margins of the diamond value chain in 2017.Notes: The figure presents profit margins of the mining value chain in 2017.The analysis of exploration and production is based on data for ALROSA, De Beers Group, Rio Tinto, Dominion Diamond Mines, Petra Diamonds.The analysis of large chains is based on data for Chow Sang Sang, Chow Tai Fook, Gitanjali Jewels, Lukfook, Signet Jewelers, Tiffany & Co., Titan Company.Source: (Bain and Company and Antwerp World Diamond Center 2018).

Figure 3 .
Figure 3. Major producers of rough diamonds in millions of carats (2014-2018).Notes: The figure presents major diamond mining companies and producers of rough diamonds in millions of carats in 2017.Source: (Bain and Company, Antwerp World Diamond Center 2018).

Figure 4 .
Figure 4.Sales of rough diamonds by producers in billions of dollars, including inventories (2013-2018).Notes: The figure presents major diamond mining companies and producers of rough diamonds in billions of dollars.Estimated realized price is based on an estimate of carats sold if data is published, if not, based on production data.ALROSA revenues represent diamond sales only.Dominion Diamond Mines 2017 results based on H1 2017 as the company was delisted and no longer publishes the data.Petra Diamonds data converted from year ending in June to year ending in December, based on company reports for full year and half year.Only diamonds tracked by Kimberley Process are included.Other is estimated assuming no price change for the players of this segment.E is an estimate.In order to estimate average price per carat sold, total value of diamonds sold is divided by total volume of diamonds sold.Source: (Bain and Company, Antwerp World Diamond Center 2018).

Figure 3 .
Figure 3. Major producers of rough diamonds in millions of carats (2014-2018).Notes: The figure presents major diamond mining companies and producers of rough diamonds in millions of carats in 2017.Source: (Bain and Company and Antwerp World Diamond Center 2018).

Figure 3 .
Figure 3. Major producers of rough diamonds in millions of carats (2014-2018).Notes: The figure presents major diamond mining companies and producers of rough diamonds in millions of carats in 2017.Source: (Bain and Company, Antwerp World Diamond Center 2018).

Figure 4 .
Figure 4.Sales of rough diamonds by producers in billions of dollars, including inventories (2013-2018).Notes: The figure presents major diamond mining companies and producers of rough diamonds in billions of dollars.Estimated realized price is based on an estimate of carats sold if data is published, if not, based on production data.ALROSA revenues represent diamond sales only.Dominion Diamond Mines 2017 results based on H1 2017 as the company was delisted and no longer publishes the data.Petra Diamonds data converted from year ending in June to year ending in December, based on company reports for full year and half year.Only diamonds tracked by Kimberley Process are included.Other is estimated assuming no price change for the players of this segment.E is an estimate.In order to estimate average price per carat sold, total value of diamonds sold is divided by total volume of diamonds sold.Source: (Bain and Company, Antwerp World Diamond Center 2018).

Figure 4 .
Figure 4.Sales of rough diamonds by producers in billions of dollars, including inventories (2013-2018).Notes: The figure presents major diamond mining companies and producers of rough diamonds in billions of dollars.Estimated realized price is based on an estimate of carats sold if data is published, if not, based on production data.ALROSA revenues represent diamond sales only.Dominion Diamond Mines 2017 results based on H1 2017 as the company was delisted and no longer publishes the data.Petra Diamonds data converted from year ending in June to year ending in December, based on company reports for full year and half year.Only diamonds tracked by Kimberley Process are included.Other is estimated assuming no price change for the players of this segment.E is an estimate.In order to estimate average price per carat sold, total value of diamonds sold is divided by total volume of diamonds sold.Source:(Bain and Company and Antwerp World Diamond Center 2018).

Figure 5 .
Figure 5. Mid-range and Higher-range diamond indices price dynamics.Notes: Price dynamics of diamond price indices: Mid-range Diamond Index (MDI) and Higher-range Diamond Index (HDI) in their original currencies (USD) for the period 4 June 2007-15 February 2019: Source: Polished Prices and D'Ecclesia and Jotanovic (2018).

Figure 5 .
Figure 5. Mid-range and Higher-range diamond indices price dynamics.Notes: Price dynamics of diamond price indices: Mid-range Diamond Index (MDI) and Higher-range Diamond Index (HDI) in their original currencies (USD) for the period 4 June 2007-15 February 2019: Source: Polished Prices and D'Ecclesia and Jotanovic (2018).

Figure 6 .
Figure 6.Price dynamics of diamond stocks.Notes: Price dynamics of 8 diamond stocks included in the analysis sub-sample in their original currencies for the period 4 June 2007-15 February 2019: Alrosa (RUB), Anglo American (GBP), Firestone Diamonds (GBP), Rio Tinto (GBP), Petra Diamonds (GBP), Mountain Province Diamonds (CAD), Stornoway Diamond Corporation (CAD) and Star Diamond Corporation (CAD).Alrosa is only listed in 2011.Source: Elaboration on Bloomberg and Yahoo Finance data.

Figure 7 .
Figure 7. GARCH conditional variances of log returns of diamond stocks and indices.Notes: The figure presents estimated conditional variances (E-GARCH) of log returns of 8 studied diamond stocks (Alrosa, Firestone Diamonds, Mountain Province Diamonds, Petra Diamonds, Anglo American, Rio Tinto, Star Diamond Corporation, Stornoway Diamond Corporation) and 2 diamond indices (Higher-range DI and Mid-range DI) for the period 4 June 2007-15 February 2019.Source: Elaboration on Bloomberg and Yahoo Finance data.

Figure 7 .
Figure 7. GARCH conditional variances of log returns of diamond stocks and indices.Notes: The figure presents estimated conditional variances (E-GARCH) of log returns of 8 studied diamond stocks (Alrosa, Firestone Diamonds, Mountain Province Diamonds, Petra Diamonds, Anglo American, Rio Tinto, Star Diamond Corporation, Stornoway Diamond Corporation) and 2 diamond indices (Higher-range DI and Mid-range DI) for the period 4 June 2007-15 February 2019.Source: Elaboration on Bloomberg and Yahoo Finance data.

Figure 8 .
Figure 8. DCC-E-GARCH correlations among diamond stocks and diamond indices.Notes: The figure presents some of the estimated time-varying correlations (DCC-E-GARCHs) between log returns of studied diamond stocks and 2 diamond indices: (Alrosa -Mid-range DI, Rio Tinto -Higher-range DI, Anglo American -Higher-range DI, Stornoway Diamond Corporation -Mid-range DI, Petra Diamonds -Mid-range DI and Mountain Province Diamonds -Higher-range DI) for the period 4 June 2007-15 February 2019.Source: Elaboration on Bloomberg and Yahoo Finance data.

Figure 8 .
Figure 8. DCC-E-GARCH correlations among diamond stocks and diamond indices.Notes: The figure presents some of the estimated time-varying correlations (DCC-E-GARCHs) between log returns of studied diamond stocks and 2 diamond indices: (Alrosa -Mid-range DI, Rio Tinto -Higher-range DI, Anglo American -Higher-range DI, Stornoway Diamond Corporation -Mid-range DI, Petra Diamonds -Mid-range DI and Mountain Province Diamonds -Higher-range DI) for the period 4 June 2007-15 February 2019.Source: Elaboration on Bloomberg and Yahoo Finance data.

Table 1 .
Diamond-mining stocks traded at different exchange markets.
Notes: The table presents, to our best knowledge, all diamond-mining companies traded on official stock Exchanges, sorted by the average daily volume during the last 3 months (25 November 2018-25 February 2019).* Companies that are only involved in diamond mining and explorations and no other base or precious metals.Source: Elaboration on Bloomberg and Yahoo Finance data.

Table 1 .
(Bain and Company, Antwerp World Diamond Center 2013)current leader in diamond production in value(Bain and Company, Antwerp World Diamond Center 2013).Diamond-mining stocks traded at different exchange markets.
Notes: The table presents, to our best knowledge, all diamond-mining companies traded on official stock Exchanges, sorted by the average daily volume during the last 3 months (25 November 2018-25 February 2019).* Companies that are only involved in diamond mining and explorations and no other base or precious metals.Source: Elaboration on Bloomberg and Yahoo Finance data.

Table 2 .
Financial information of the 8 studied diamond-mining stocks.
Notes: The table presents financial information of the selected 8 diamond-mining stocks.Market value is the market capitalization of a company (number of shares × their current price), expressed in millions of USD.Market to book ratio corresponds to the ratio between market capitalization and company's net asset value.Growth rates correspond to percentage changes between 2017 and 2018, expressed in %. * The company does not currently operate any producing properties and, as such, is dependent upon the issuance of new equity to finance its ongoing obligations.Source: Elaboration on Bloomberg and Yahoo Finance data.
, reducing trend(Stornoway D. C.)or constant behavior(Firestone D. and Star D. C.).Firestone Diamonds and Star Diamond Corporation exhibited similar dynamics with no price recovery after the crisis.On the other hand, Mountain Province Diamonds and Petra Diamonds exhibited similar price increases on different occasions, such as during the recovery process in 2010 and then again in 2016.

Table 3 .
Summary statistics for diamond stocks and diamond indices in levels (original currencies).
Notes: Summary statistics for 8 diamond stocks included in the analysis sub-sample in levels (in their original currencies for the period 4 June 2007-15 February 2019: Alrosa (RUB), Anglo American (GBP), Firestone Diamonds (GBP), Rio Tinto (GBP), Petra Diamonds (GBP), Mountain Province Diamonds (CAD), Stornoway Diamond Corporation (CAD) and Star Diamond Corporation (CAD)).Alrosa is only listed in 2011.Source: Elaboration on Bloomberg and Yahoo Finance data.

Table 4 .
ADF test statistics for diamond stocks and diamond indices in levels.
Notes: The table presents ADF test statistics of 8 studied diamond stocks in levels in their original currencies for the period 4 June 2007-15 February 2019.The estimated equation includes a constant and a linear trend.Mackinnon critical (asymptotic) values are used for the rejection of the null hypothesis.*** and * indicate 1% and 10% significance levels respectively.Source: Elaboration on Bloomberg and Yahoo Finance data.

Table 5 .
Bai Perron test statistics for diamond stock price series and diamond indices.The table presents Bai Perron test statistics for 8 diamond stocks (in their original currencies) and the two Diamond Indices for the period 4 June 2007-15 February 2019.The model tests the null hypothesis of L against L + 1 sequentially determined structural breaks. Notes:

Table 6 .
ARCH LM test statistics for diamond stock prices and diamond indices.
: the table presents ARCH LM test statistics of 8 diamond stocks in their original currencies for the period 4 June 2007-15 February 2019.The null hypothesis of homoskedasticity is tested against the alternative of heteroskedasticity (ARCH effect).u t denotes the residual series of the least squares regression on the dependent variable Y t .Number of lags for the test was chosen based on the AIC.The test is the usual F statistic for the regression on the squared residuals.Obs.*R 2 denotes the LM test statistic for the null hypothesis.The statistic follows a χ 2 distribution with m degrees of freedom.*** indicates 1% significance level.Source: Elaboration on Bloomberg and Yahoo Finance data. Notes

Table 7 .
GARCH parameters for diamond stock prices.The table presents conditional variances and their parameters of 8 studied diamond stocks in their original currencies for the period 4 June 2007-15 February 2019 estimated by the GARCH family models.αdenotes the symmetric ARCH term, β represents the GARCH term measuring the persistence of conditional volatility, while γ measures the leverage effect and asymmetric ARCH term.The leverage affect is confirmed if γ is positive and significant in the case of TARCH.The numbers reported in brackets are z-statistics.***and ** indicate 1% and 5% significance levels, respectively.Source: Elaboration on Bloomberg data.Source: Elaboration on Bloomberg and Yahoo Finance data.Notes: The table presents conditional variances and their parameters of 8 studied diamond stocks in their original currencies for the period 4 June 2007-15 February 2019 estimated by the GARCH family models. denotes the symmetric ARCH term,  represents the GARCH term measuring the persistence of conditional volatility, while  measures the leverage effect and asymmetric ARCH term.The leverage affect is confirmed if  is positive and significant in the case of TARCH.The numbers reported in brackets are z-statistics.*** and ** indicate 1% and 5% significance levels, respectively.Source: Elaboration on Bloomberg data.Source: Elaboration on Bloomberg and Yahoo Finance data. Notes: The table presents cross-correlation matrix of log returns of 8 studied diamond stocks in their original currencies and diamond price indices for the period 4 June 2007-15 February 2019.The series have been individually matched to maintain the maximum number of observations for each pairwise correlation analysis.Source: Elaboration on Bloomberg and Yahoo Finance data. Notes:

Table 9 .
DCC parameters from the DCC-EGARCH correlation estimations.: The table reports DCC parameters from the DCC-EGARCH correlation estimations of 8 studied diamond stocks and 2 diamond indices for the period 4 June 2007-15 February 2019.***, ** and * indicate 1%, 5% and 10% significance levels, respectively.Source: Elaboration on Bloomberg and Yahoo Finance data. Notes

Table 10 .
GARCH regression coefficients from the mean equation.The table reports estimated betas of diamond mining stocks for the period 4 June 2007-15 February 2019.***, ** and * indicate 1%, 5% and 10% significance levels, respectively.Source: Elaboration on Bloomberg and Yahoo Finance data. Notes: