Gold-oil prices co-movements and portfolio diversification implications

Chkili, Walid (2015): Gold-oil prices co-movements and portfolio diversification implications.

Abstract

In this paper we use the bivariate fractionally integrated GARCH (FIGARCH) model to analyze the dynamic relationship between gold and crude oil markets. We also test the role of gold as a hedge or safe haven for crude oil risk. Empirical results show that the dynamic links between the two markets vary over time and decline significantly during major economic and political crisis episodes. This suggests that gold can act as a safe haven during extreme oil market conditions. Finally, Findings indicate that adding gold to crude oil portfolio helps to hedge against the oil risk.

• Item Type: MPRA Paper
• Language: English
• Keywords: Gold, oil, hedge, safe haven, DCC- FIGARCH
• Subjects: C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C58 - Financial Econometrics; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy

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