Analyzing time-frequency co-movements across gold and oil prices with BRICS stock markets: A VaR based on wavelet approach

Walid Mensi, Besma Hkiri, Khamis H. Al-Yahyaee, Sang Hoon Kang

Research output: Contribution to journalArticle

19 Citations (Scopus)

Abstract

This paper examines the co-movements between five of the most important emerging stock markets namely the BRICS (Brazil, Russia, India, China and South Africa) and both the crude oil prices [West Texas Intermediate (WTI) and Europe Brent] and gold prices which are relevant to those commodity exporters and voracious consumers. Our results based on the wavelet approach show that BRICS index returns co-move with the WTI crude oil price at low frequencies (long horizons). Moreover, the strong level of co-movement is particularly captured during the onset of the global financial crisis. On the other hand, we find no evidence of co-movement between the BRICS stock markets and the gold price, indicating that gold can act as a hedge or a safe haven asset for the BRICS against extreme market movements. The implications of these results for the BRICS-commodity portfolios show that the portfolio risk (measured by the Value at Risk) is affected by the co-movements between stock and oil markets.

Original languageEnglish
JournalInternational Review of Economics and Finance
DOIs
Publication statusAccepted/In press - 2017

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Keywords

  • BRICS
  • Co-movement
  • Commodity prices
  • Value at risk
  • Wavelet

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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