Are timber and water investments safe-havens? A volatility spillover approach and portfolio hedging strategies for investors

Aristeidis Samitas, Spyros Papathanasiou, Drosos Koutsokostas and Elias Kampouris

Finance Research Letters, 2022, vol. 47, issue PA

Abstract: Using a time-varying spillover approach, we investigate volatility spillovers between natural alternative investments, i.e. timber and water, and a battery of traditional instruments comprising equities, bonds, crude oil, gold, real estate, shipping and currency, for the period 1/1/2010–9/30/2021. Results show that the sample markets are moderately integrated and total connectedness escalated during stress periods. Moreover, we examine the hedging ability of timber and water by constructing optimal hedge ratios and portfolio weights. Both assets constitute an effective hedging tool for shipping, crude oil and bond investors, with the short position in the volatility of water to provide higher hedging effectiveness.

Keywords: Alternative investments; Connectedness; Timber water investments; COVID-19; Portfolio diversification (search for similar items in EconPapers)
JEL-codes: G11 G12 G15 Q23 Q25 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:47:y:2022:i:pa:s1544612321005870

DOI: 10.1016/j.frl.2021.102657

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