EconPapers    
Economics at your fingertips  
 

Dependence between oil price volatility, Islamic and conventional Dow Jones indexes: Implication for portfolio management and hedging effectiveness

Mohamed Fakhfekh (), Ahmed Ghorbel (), Nadhem Selmi () and Nejib Hachicha ()
Additional contact information
Mohamed Fakhfekh: Faculté des Sciences Economiques et de Gestion de Sfax
Nadhem Selmi: Faculté des Sciences Economiques et de Gestion de Sfax
Nejib Hachicha: Faculté des Sciences Economiques et de Gestion de Sfax

Journal of Asset Management, 2017, vol. 18, issue 1, 29-48

Abstract: Abstract The purpose behind this paper is twofold. Firstly, it aims at discussing the relationship between oil price and Islamic as well as conventional Dow Jones indexes. Secondly, it focuses on determining the optimal portfolio hedging strategy. In broader terms, it helps analyze the extreme dependence structure lying between oil price and Islamic as well as conventional Dow Jones indexes, using Kendall Tau estimation through copula approach. More importantly, it is designed to determine the most appropriate hedging strategy fit for oil stock portfolio against the negative variation risk predominating stock market prices. The variables involved in our research are WTI and Brent Oil Price, Islamic Dow Jones index, and conventional Dow Jones index. Using daily data relevant to the period ranging from January 1, 1996 to March 17, 2014, the study applies the FIEGARCH-EVT-Copula and Hedge ratios analysis. The reached findings have revealed that the dependence structure proves to differ noticeably among the Islamic Dow Jones – oil price and the conventional Dow Jones one. Indeed, the Islamic Dow Jones indexes appear to be more dependent on the WTI and Brent oil price than the conventional Dow Jones index. Based on the Hedging ratio and mean–variance approach, investment in Islamic index–oil portfolio has been discovered to be more beneficial as compared to investing in conventional index–oil portfolio.

Keywords: extreme dependence structure; copula approach; hedge ratio; crude oil; Dow Jones Islamic and conventional indexes (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://link.springer.com/10.1057/s41260-016-0030-7 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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: https://EconPapers.repec.org/RePEc:pal:assmgt:v:18:y:2017:i:1:d:10.1057_s41260-016-0030-7

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/41260

Access Statistics for this article

Journal of Asset Management is currently edited by Marielle de Jong and Dan diBartolomeo

More articles in Journal of Asset Management from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla ().

 
Page updated 2019-04-09
Handle: RePEc:pal:assmgt:v:18:y:2017:i:1:d:10.1057_s41260-016-0030-7