TY - JOUR
T1 - Oil and precious metals: Volatility transmission, hedging, and safe haven analysis from the Asian crisis to the COVID-19 crisis
T2 - Volatility transmission, hedging, and safe haven analysis from the Asian crisis to the COVID-19 crisis
AU - Mensi, Walid
AU - Ramzi Nekhili
AU - Xuan Vinh Vo
AU - Sang Hoon Kang
N1 - Publisher Copyright:
© 2021 Economic Society of Australia, Queensland
PY - 2021
Y1 - 2021
N2 - This paper examines the volatility transmission between crude oil and four precious metals (i.e., gold, silver, platinum, and palladium) and investigates whether oil can be considered as a hedge or safe-haven asset against four precious metals. Our empirical analysis reveals several important findings. First, we determine that the volatility transmission was time-varying and that influence from the Asian crisis, the bursting of the dot-com bubble, the 2008 global financial crisis, the recent oil-price crash, and COVID-19 alternated between negative and positive values over the entire studied period. We further conclude that Brent oil is a diversifier and a weak safe haven for precious metals; and thus, that a combined portfolio composed of Brent-oil and precious-metals futures yields better hedging effectiveness. These findings indicate that oil futures are a useful investment that reduces downside risks and strengthens diversification benefits in portfolio risk management.
AB - This paper examines the volatility transmission between crude oil and four precious metals (i.e., gold, silver, platinum, and palladium) and investigates whether oil can be considered as a hedge or safe-haven asset against four precious metals. Our empirical analysis reveals several important findings. First, we determine that the volatility transmission was time-varying and that influence from the Asian crisis, the bursting of the dot-com bubble, the 2008 global financial crisis, the recent oil-price crash, and COVID-19 alternated between negative and positive values over the entire studied period. We further conclude that Brent oil is a diversifier and a weak safe haven for precious metals; and thus, that a combined portfolio composed of Brent-oil and precious-metals futures yields better hedging effectiveness. These findings indicate that oil futures are a useful investment that reduces downside risks and strengthens diversification benefits in portfolio risk management.
KW - Asymmetric dynamic correlations
KW - Hedge
KW - Oil
KW - Precious metals
KW - Safe haven
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U2 - 10.1016/j.eap.2021.04.009
DO - 10.1016/j.eap.2021.04.009
M3 - Article
SN - 0313-5926
VL - 71
SP - 73
EP - 96
JO - Economic Analysis and Policy
JF - Economic Analysis and Policy
ER -