Hedging stock market risks: Can gold really beat bonds?

Rufei Ma, Bianxia Sun, Pengxiang Zhai and Yi Jin

Finance Research Letters, 2021, vol. 42, issue C

Abstract: This paper explores the impacts of stock market volatility on stock-bond and stock-gold correlations and compares the effectiveness of bonds with gold hedging the stock market risk. We propose an extensive DCC-MIDAS model, which takes the changes in stock market volatility as exogenously predetermined and accounts for its asymmetric impacts. The results show strong evidence that stock market volatility significantly and asymmetrically affects stock-bond and stock-gold correlations in different ways. Moreover, we prove that government bonds are more effective than gold in hedging stock return volatility, especially in the period of stock market turbulence. Our results suggest that government bonds are overall a better hedge for stock investors.

Keywords: Long-term correlation; DCC-MIDAS; Hedge; Stock market volatility (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1544612320317323
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:42:y:2021:i:c:s1544612320317323

DOI: 10.1016/j.frl.2020.101918

Access Statistics for this article

Finance Research Letters is currently edited by R. Gençay

More articles in Finance Research Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().