Economics at your fingertips  

The hedging effectiveness of global sectors in emerging and developed stock markets

Jiayu Jin, Liyan Han, Lei Wu and Hongchao Zeng

International Review of Economics & Finance, 2020, vol. 66, issue C, 92-117

Abstract: This paper investigates whether global sectors could act as effective hedges for emerging and developed market equities. By comparing the hedging performance of the Global Energy, Financials, Industrials, and Technologies ETFs, we find that the Global Financials ETF (the Global Industrials ETF) is the most desirable hedge for the emerging/BRIC countries ETF (the developed countries ETF). These two sector ETFs provide even higher hedging effectiveness in the crisis period than in the normal period. An evaluation of the hedging effectiveness produced by the DCC, ADCC, and GO-GARCH models suggests that the ADCC model performs best during the crisis period, while the more parsimonious DCC model performs as well as the ADCC model over a longer horizon including both normal and crisis times. These findings have important implications for managing and reducing the systematic risk of equity portfolios.

Keywords: Country ETFs; Sector ETFs; Hedging effectiveness; Developed markets; Emerging markets; BRIC markets (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: 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.iref.2019.11.001

Access Statistics for this article

International Review of Economics & Finance is currently edited by H. Beladi and C. Chen

More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Haili He ().

Page updated 2020-06-13
Handle: RePEc:eee:reveco:v:66:y:2020:i:c:p:92-117