Safe Haven or Hedge: Diversification Abilities of Asset Classes in Pakistan

Zulfiqar Ali Imran and Muhammad Ahad ()

MPRA Paper from University Library of Munich, Germany

Abstract: This study compares the safe haven properties of asset classes of real estate (house, plot and residential), gold, dollar, and oil against equity returns in Pakistan for the period January 2011-December 2020. We employ the wavelet coherence to encapsulate the overall dependence and correlation of asset classes. Our results show the dependence is weaker (stronger) in short (long) term investment horizon. We also study the potential of diversification at the tail of returns distribution by applying wavelet value-at-risk (VaR) framework that reveals the degree of co-movement between gold and equity returns greatly affects the portfolio risk followed by residential property and oil. Our findings are beneficial for the individual investor, fund managers and financial advisors looking for the optimal portfolio combination that hedge the excessive negative movements in equity returns subject to the heterogeneity in the investment horizon.

Keywords: Equity; Real Estate; Oil; Gold, US Dollar; Diversification; Pakistan. (search for similar items in EconPapers)
JEL-codes: F21 G11 G15 Q02 (search for similar items in EconPapers)
Date: 2021-04-01, Revised 2021-05-02
New Economics Papers: this item is included in nep-cwa, nep-isf and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:107613

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