Spillovers and hedging between US equity sectors and gold, oil, islamic stocks and implied volatilities

Sang Hoon Kang, Jose Arreola Hernandez, Mobeen Ur Rehman, Syed Jawad Hussain Shahzad and Seong-Min Yoon

Resources Policy, 2023, vol. 81, issue C

Abstract: We investigate the spillovers and hedging between US equity sector returns and oil, gold, Islamic stocks, and the implied volatilities of oil (OVX) and US stock market (VIX) based on spillover indexes and portfolio hedging methods. The spillover results indicate that the 30-day forward-looking market expectations of VIX most strongly influence all 10 US equity sectors’ returns. The healthcare and information technology (real estate and utilities) sectors are the most (least) affected by VIX. The US Islamic market index is the highest spillover transmitter (receiver) to (from) US sectoral returns compared to gold, oil, and OVX. The highest transmitters to and receivers of spillover from all other sectors are the industrial, consumer discretionary, and basic materials sectors. The real estate and utilities are mainly net spillover receiver sectors. Finally, the portfolio hedging results show that gold, oil, and US Islamic stocks most effectively hedge the risk of the real estate equity sector. Gold also emerges as the most effective hedge for the financial sector.

Keywords: US equity Sectors; Spillover; Hedging; Commodities; Stock market; Implied volatility (search for similar items in EconPapers)
JEL-codes: C58 G11 Q41 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:81:y:2023:i:c:s0301420722007292

DOI: 10.1016/j.resourpol.2022.103286

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