Hedging oil price risk with gold during COVID-19 pandemic

Salisu, Afees A. and Vo, Xuan Vinh and Lawal, A. I. (2021) Hedging oil price risk with gold during COVID-19 pandemic. Resources Policy, 70. p. 101897. ISSN 03014207

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Official URL: http://dx.doi.org/10.1016/j.resourpol.2020.101897


This paper assesses the role of gold as a safe haven or hedge against crude oil price risks. We employ the asymmetric VARMA-GARCH model, using daily data from January 2016 to August 2020. To account for the impact of COVID-19 pandemic, we partitioned the data into two to reflect the periods before and during the pandemic. Our empirical results find gold as a significant safe haven against oil price risks. The optimal portfolio and hedging analyses conducted also validate the hedging effectiveness of gold against risk associated with oil. The robustness of our results is further confirmed using three other prominent precious metals - silver, platinum, and palladium. In sum, our results are useful for investors and portfolio managers that are desirous of using gold and other precious metals as portfolio rebalancing tools to minimize or circumvent risks associated with volatile oil returns.

Item Type: Article
Subjects: H Social Sciences > HG Finance
Depositing User: ADEDOYIN LAWAL
Date Deposited: 29 Jun 2021 10:46
Last Modified: 29 Jun 2021 10:46
URI: https://eprints.lmu.edu.ng/id/eprint/3047

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