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Gold and Islamic Stocks: A Hedge and Safe Haven Comparison in Time - Grequency domain for BRICS

Raza, Naveed and Ibrahimy, Ahmad and Ali, Azwadi (2015): Gold and Islamic Stocks: A Hedge and Safe Haven Comparison in Time - Grequency domain for BRICS. Forthcoming in: Proceedings of the Asia Pacific Conference on Business and Social Sciences 2015, Kuala Lumpur (in partnership with The Journal of Developing Areas) No. ISBN 978-0-9925622-2-9 : pp. 1-20.

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ABSTRACT This paper has investigated the role of safe haven asset in time and frequency domain while comparing returns on gold and Dow Jones Islamic world Emerging Market index for two different crises periods by using the daily data from January 1st 1996 to December 31st 2014. Wavelet coherency has been utilized to ascertain the best time frequency to determine hedge and safe haven ability of gold. Our result indicates that gold maintain its capacity as hedging instrument for BRICS in short and long-run during Asian financial crises of 1997-98 and in 2007 global financial crises gold exhibits a weak safe haven in long-run and hedge or safe haven property of gold is market specific. Islamic stock index (DJIEM) and conventional stock markets are co-integrated except china where low correlation is witnessed. Gold has also played a leading role in world Islamic emerging markets and displayed negative correlation across a range of frequencies. Moreover, results of the panel co-integration depicted that the Islamic emerging and BRICS equity markets are co-integrated and global investor should carefully monitor the risk associated with the varying diversification benefits.

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