Hedging the Risks of MENA Stock Markets with Gold: Evidence from the Spectral Approach

Awatef Ourir (), Elie Bouri () and Essahbi Essaadi
Additional contact information
Awatef Ourir: University of Jendouba, FSEJG
Elie Bouri: Lebanese American University

Computational Economics, 2023, vol. 61, issue 1, No 8, 197-231

Abstract: Abstract In this paper, we contribute to the old debate on the dynamic correlation between gold and stock markets by considering a spectral approach within the framework of portfolio hedging. Specifically, we consider eight MENA stock markets (Tunisia, Egypt, Morocco, Jordan, UAE, Saudi Arabia, Qatar, and Oman) and examine the optimal composition between gold and the stock market index, with a minimum portfolio risk and a high expected return. Based on the spectral approach, we propose seven portfolio structures and evaluate them through a comparison with the conventional DCC-GARCH method and the most best 10 portfolios constructed by using wavelet approach. The main results show that the spectral-based approach outperforms the DCC-GARCH and the wavelet methods. In fact, the optimal gold-stock composition depends on the spectral density of each stock market index, where a stock market index with a stable spectral density requires more investments in gold than a stock market index with an unstable spectral density.

Keywords: Hedge ratio; Evolutionary spectral analysis; DCC-GARCH model; Gold; Stock market index (search for similar items in EconPapers)
JEL-codes: C10 C61 G11 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://link.springer.com/10.1007/s10614-021-10204-8 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
Working Paper: Hedging the Risks of MENA Stock Markets with Gold: Evidence from the Spectral Approach (2021)
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: https://EconPapers.repec.org/RePEc:kap:compec:v:61:y:2023:i:1:d:10.1007_s10614-021-10204-8

Ordering information: This journal article can be ordered from
http://www.springer. ... ry/journal/10614/PS2

DOI: 10.1007/s10614-021-10204-8

Access Statistics for this article

Computational Economics is currently edited by Hans Amman

More articles in Computational Economics from Springer, Society for Computational Economics Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().