Volatility spillovers and cross-hedging between gold, oil and equities: Evidence from the Gulf Cooperation Council countries

Maghyereh, A.I., Awartani, B. and Tziogkidis, P. 2017. Volatility spillovers and cross-hedging between gold, oil and equities: Evidence from the Gulf Cooperation Council countries. Energy Economics. 68, pp. 440-453. doi:10.1016/j.eneco.2017.10.025

TitleVolatility spillovers and cross-hedging between gold, oil and equities: Evidence from the Gulf Cooperation Council countries
AuthorsMaghyereh, A.I., Awartani, B. and Tziogkidis, P.
Abstract

The paper examines the return and volatility spillovers between crude oil, gold and equities, and investigates the usefulness of the two commodities in hedging equity portfolios. Using daily data from January 20043 to May 2016 for the Gulf Cooperation Council countries, a DCC-GARCH model is used to estimate dynamic correlations and hedge ratios. We find significant spillovers from oil to equities, highlighting the heavy dependence of the local economies on oil. Moreover, the spillovers of gold on the stock markets are insignificant, suggesting that gold price fluctuations do not necessarily influence equity investment decisions. In the opposite direction, we find that equities do not exert significant influence on the two commodities, which we attribute to the relatively small capitalisation of the exchanges. Our results reveal low dynamic correlations and hedge ratios, with a few spikes during crises, indicating that oil and gold are cheap hedges for stocks, albeit not good ones, while they could be considered as weak safe havens, but at a considerable cost.

JournalEnergy Economics
Journal citation68, pp. 440-453
ISSN0140-9883
Year2017
PublisherElsevier
Accepted author manuscriptmanuscript .pdf
Digital Object Identifier (DOI)doi:10.1016/j.eneco.2017.10.025
Publication dates
Published in print25 Oct 2017
Published25 Oct 2017
LicenseCC BY-NC-ND 4.0

Related outputs

The co-movement between oil and clean energy stocks: A wavelet-based analysis of horizon associations
Maghyereh, A.I., Awartani, B. and Abdoh, H. 2019. The co-movement between oil and clean energy stocks: A wavelet-based analysis of horizon associations. Energy. 169, pp. 895-913. doi:10.1016/j.energy.2018.12.039

The connectedness and hedging between gold and Islamic securities in the short, medium and long term
Maghyereh, A.I., Abdoh, H. and Awartani, B. 2019. The connectedness and hedging between gold and Islamic securities in the short, medium and long term. Pacific-Basin Finance Journal. 54, pp. 13-28. doi:10.1016/j.pacfin.2019.01.008

Can gold be used as a hedge against the risks of Sharia-compliant securities? Application for Islamic portfolio management
Maghyereh, A.I., Awartani, B. and Hassan, A. 2018. Can gold be used as a hedge against the risks of Sharia-compliant securities? Application for Islamic portfolio management. Journal of Asset Management. 19 (6), p. 394–412. doi:10.1057/s41260-018-0090-y

Time-varying transmission between oil and equities in the MENA region: New evidence from DCC-MIDAS analyses
Awartani, B., Javed, F., Maghyereh, A. and Virkd, N. 2018. Time-varying transmission between oil and equities in the MENA region: New evidence from DCC-MIDAS analyses. Review of Development Finance. 8 (2), pp. 481-483. doi:10.1016/j.rdf.2018.11.001

The factors influencing the decision to list on Abu Dhabi securities exchange
Maghyereh, A.I. and Awartani, B. 2018. The factors influencing the decision to list on Abu Dhabi securities exchange. Journal of Behavioral and Experimental Finance. 19, pp. 89-103. doi:10.1016/j.jbef.2018.05.004

Volatility spillovers and cross-hedging between gold, oil and equities: Evidence from the Gulf Cooperation Council countries
Maghyereh, A.I., Awartani, B. and Tziogkidis, P. 2017. Volatility spillovers and cross-hedging between gold, oil and equities: Evidence from the Gulf Cooperation Council countries. Energy Economics. 68, pp. 440-453. doi:10.1016/j.eneco.2017.10.025

The connectedness between crude oil and financial markets: Evidence from implied volatility indices
Awartani, B., Maghyereh, A. and Guermat, C. 2016. The connectedness between crude oil and financial markets: Evidence from implied volatility indices. Journal of Commodity Markets. 4 (1), pp. 56-69. doi:10.1016/j.jcomm.2016.11.002

Dynamic transmissions between Sukuk and bond markets
Maghyereh, A. and Awartani, B. 2016. Dynamic transmissions between Sukuk and bond markets. Research in International Business and Finance. 38, pp. 246-261. doi:10.1016/j.ribaf.2016.04.016

Corporate debt maturity in the MENA region: Does institutional quality matter?
Awartani, B., Belkhir, M., Boubaker, S. and Maghyereh, A. 2016. Corporate debt maturity in the MENA region: Does institutional quality matter? International Review of Financial Analysis. 46, pp. 309-325. doi:10.1016/j.irfa.2015.10.002

The directional volatility connectedness between crude oil and equity markets: New evidence from implied volatility indexes
Maghyereh, A., Awartani, B. and Bouri, E. 2016. The directional volatility connectedness between crude oil and equity markets: New evidence from implied volatility indexes. Energy Economics. 57, pp. 78-93. doi:10.1016/j.eneco.2016.04.010

Institutions and corporate capital structure in the MENA region
Belkhir, M., Maghyereh, A. and Awartani, B. 2016. Institutions and corporate capital structure in the MENA region. Emerging Markets Review. 26, pp. 99-129. doi:10.1016/j.ememar.2016.01.001

Crude oil prices and sectoral stock returns in Jordan around the Arab uprisings of 2010
Bouri, E., Awartani, B. and Maghyereh, A. 2016. Crude oil prices and sectoral stock returns in Jordan around the Arab uprisings of 2010. Energy Economics. 56, pp. 205-214. doi:https://doi.org/10.1016/j.eneco.2016.03.021

Dynamic transmissions between the U.S. and equity markets in the MENA countries: New evidence from pre- and post-global financial crisis
Maghyereh, A., Awartani, B. and Al Hilo, K. 2015. Dynamic transmissions between the U.S. and equity markets in the MENA countries: New evidence from pre- and post-global financial crisis. Quarterly Review of Economics and Finance. 56, pp. 123-138. doi:10.1016/j.qref.2014.08.005

Bank distress prediction: Empirical evidence from the Gulf Cooperation Council countries
Maghyereh, A. and Awartani, B. 2014. Bank distress prediction: Empirical evidence from the Gulf Cooperation Council countries. Research in International Business and Finance. 30, pp. 126-147. doi:10.1016/j.ribaf.2013.07.001

The effect of market structure, regulation, and risk on banks efficiency: Evidence from the Gulf cooperation council countries
Maghyereh, A. and Awartani, B. 2014. The effect of market structure, regulation, and risk on banks efficiency: Evidence from the Gulf cooperation council countries. Journal of Economic Studies. 41 (3), pp. 405-430. doi:10.1108/JES-05-2012-0067

Dynamic spillovers between oil and stock markets in the Gulf Cooperation Council Countries
Awartani, B. and Maghyereh, A.I. 2013. Dynamic spillovers between oil and stock markets in the Gulf Cooperation Council Countries. Energy Economics. 36, pp. 28-42. doi:10.1016/j.eneco.2012.11.024

Directional spillovers from the U.S. and the Saudi market to equities in the Gulf Cooperation Council countries
Awartani, B., Maghyereh, A.I. and Shiab, M.A. 2013. Directional spillovers from the U.S. and the Saudi market to equities in the Gulf Cooperation Council countries. Journal of International Financial Markets, Institutions and Money. 27, pp. 224-242. doi:10.1016/j.intfin.2013.08.002

Permalink - https://westminsterresearch.westminster.ac.uk/item/q34q4/volatility-spillovers-and-cross-hedging-between-gold-oil-and-equities-evidence-from-the-gulf-cooperation-council-countries


Share this
Tweet
Email