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How COVID-19 upturns the hedging potentials of gold against oil and stock markets risks: Nonlinear evidences through threshold regression and markov-regime switching models

Oluwasegun Adekoya (), Johnson Oliyide and Gabriel O. Oduyemi

Resources Policy, 2021, vol. 70, issue C

Abstract: The havoc the present COVID-19 is wreaking on many commodity and financial markets, and the consequent losses to investors are the motivation behind our re-visitation of the hedging potential of gold against risks associated with the crude oil and stock markets. This is important following empirical evidence against the hedging ability of gold against these risks during tranquil periods. Contrary to most of the previous studies, we find that market risks associated with global oil and stock markets can be effectively hedged by gold during this COVID-19 pandemic period. Besides, there is evidence of time-variation and regime changes, as the hedging potentials seem to be stronger at higher oil and stock prices. Thus, investors seeking short-term cover and diversification due to oil and stock markets risks can find rest in gold.

Keywords: Gold; Oil price risks; Stock market risks; Nonlinearity; Regime changes; COVID-19 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:70:y:2021:i:c:s0301420720309570

DOI: 10.1016/j.resourpol.2020.101926

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