Economics at your fingertips  

Volatility spillovers and cross-hedging between gold, oil and equities: Evidence from the Gulf Cooperation Council countries

Aktham I. Maghyereh, Basel Awartani () and Panagiotis Tziogkidis ()

Energy Economics, 2017, vol. 68, issue C, 440-453

Abstract: 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 2004 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.

Keywords: Crude oil; Gold; Spillovers; Hedging; Dynamic correlation; Gulf Cooperation Council; Portfolio (search for similar items in EconPapers)
JEL-codes: G11 G15 Q02 C22 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16) Track citations by RSS feed

Downloads: (external link)
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:

DOI: 10.1016/j.eneco.2017.10.025

Access Statistics for this article

Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Haili He ().

Page updated 2020-06-02
Handle: RePEc:eee:eneeco:v:68:y:2017:i:c:p:440-453