Gold against Asian stock markets during the COVID-19 outbreak

This study examines the safe-haven and hedging roles of gold against thirteen Asian stock markets during the COVID-19 outbreak. During the COVID-19 sub-period, gold is shown to be a strong hedge (diversifier) for the majority (minority) of Asian stock markets; it exhibits the property of a strong sa...

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Bibliographic Details
Published in:Journal of risk and financial management 2021-04, Vol.14 (4), p.1-23
Main Authors: Yousaf, Imran, Bouri, Elie, Ali, Shoaib, Azoury, Nehme
Format: Article
Language:English
Subjects:
Asian stock indices
Asset allocation
Coronaviruses
COVID-19
COVID-19 outbreak
Economic crisis
Equity
Gold
hedge
Hedging
hedging effectiveness
International finance
Investments
Portfolio management
Prices
Roles
safe-haven
Securities markets
Sovereign debt
Stock exchanges
Volatility
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Summary:This study examines the safe-haven and hedging roles of gold against thirteen Asian stock markets during the COVID-19 outbreak. During the COVID-19 sub-period, gold is shown to be a strong hedge (diversifier) for the majority (minority) of Asian stock markets; it exhibits the property of a strong safe-haven in China, Indonesia, Singapore, and Vietnam, and a weak safe-haven in Pakistan and Thailand. The optimal weights of all stock-gold portfolios are lower during the COVID-19 sub-period than the pre COVID-19 sub-period, suggesting that portfolio investors should increase their investment in gold during the COVID-19 sub-period. The hedging effectiveness for most Asian stock markets is higher during the COVID-19 sub-period. Further analyses show that the hedge portfolio returns in many cases are mostly driven by gold implied volatility and inflation expectations in both sub-periods. Our findings have useful implications for market participants holding investments in Asian stocks during stressful periods.
ISSN:1911-8074
1911-8066
1911-8074
DOI:10.3390/jrfm14040186