Is gold a hedge or safe haven for Islamic stock market movements? A Markov switching approach
Journal of Multinational Financial Management, 2017, vol. 42-43, 152-163
This paper uses the Markov switching approach to investigate the role of gold as a hedge or safe haven for Islamic stock market risk. Empirical results reveal on the one hand, the presence of two distinct regimes for all the considered markets, namely a low volatility regime and a high volatility regime. More precisely, the high volatility regime coincides with the major economic and political events that occurred during the period under study. On the other hand, evidence shows that gold can act as a weak hedge and a strong safe haven against extreme Islamic stock market movements. This result has significant implications for portfolio diversification and hedging strategy choice.
Keywords: Islamic stock market; Gold; Markov switching; Hedge; Safe haven (search for similar items in EconPapers)
JEL-codes: C24 G01 G10 G11 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:mulfin:v:42-43:y:2017:i::p:152-163
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