Volatility spillovers and cross-hedging between gold, oil and equities: Evidence from the Gulf Cooperation Council countries
By Aktham Issa Maghyereh, B. Awartani, Panagiotis Tziogkidis. 2017
135 citations recorded by the source corpus.
The paper examines the return and volatility spillovers between crude oil, gold and equities, and investigates the usefulness of the two commodities in hedging equity portfolios. Using daily data from January 20043 to May 2016 for the Gulf Cooperation Council countries, a DCC-GARCH model is used to estimate dynamic correlations and hedge ratios. We find significant spillovers from oil to equities, highlighting the heavy dependence of the local economies on oil. Moreover, the spillovers of gold on the stock markets are insignificant, suggesting that gold price fluctuations do not necessarily influence equity investment decisions. In the opposite direction, we find that equities do not exert significant influence on the two commodities, which we attribute to the relatively small capitalisation of the exchanges. Our results reveal low dynamic correlations and hedge ratios, with a few spikes during crises, indicating that oil and gold are cheap hedges for stocks, albeit not good ones, while they could be considered as weak safe havens, but at a considerable cost.
Subfields: Economics and Econometrics, Renewable Energy, Sustainability and the Environment
View Paper: https://www.semanticscholar.org/paper/c66c2182c3a0094ba82b9f68a67310ce93969e91
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In Economics and Econometrics
- David Gabauer
- George Filis
- Nikolaos Antonakakis
- F. P. Gracia
- Juncal Cunado
- Stavros Degiannakis *
- Rangan Gupta
- Ioannis Chatziantoniou
In Renewable Energy, Sustainability and the Environment
Citations in the corpus
- Oil volatility, oil and gas firms and portfolio diversification (2018, background): “The conditional variance estimates can be used to construct hedge ratios and optimal portfolio weights (see, inter alia Kroner and Sultan, 1993; Kroner and Ng, 1998; Hammoudeh et al., 2010; Chang et al., 2011; Balcılar et al., 2016; Maghyereh et al., 2017)8.”