Journal ArticleDOI
Hedging Islamic and conventional stock markets with other financial assets: comparison between competing DCC models on hedging effectiveness
TLDR
In this article, the authors examined the hedging of Islamic and conventional stock markets risks using diverse financial assets (namely gold, crude oil, VISTOXX, VIX, CDSEU and DJCOM).Abstract:
This study examines the hedging of Islamic and conventional stock markets risks using diverse financial assets (namely gold, crude oil, VISTOXX, VIX, CDSEU and DJCOM). We apply DCC, ADCC and FDCC models to account for heavy tails and asymmetric returns. We use rolling window analysis to construct out-of-sample one-step-ahead forecasts of dynamic conditional correlations and optimal hedge ratios. The findings indicate that the hedge ratios vary and depend upon the inclusion of hedging assets, portfolio composition and model used. The VISTOXX is the best asset to hedge Islamic and conventional stock portfolios. Moreover, the DCC model often leads to diversification benefits and hedging effectiveness better than the others models.read more
Citations
More filters
Long and short term dynamic causal transmission amongst international stock markets
TL;DR: In this article, the authors investigated the dynamic causal linkages among nine major international stock price indexes and found significant interdependencies between the established OECD and the Asian markets, and also the leadership of the US and UK markets over the short and long run.
Journal ArticleDOI
Carbon Credit Futures as an Emerging Asset Hedging, Diversification and Downside Risks
TL;DR: In this article , the feasibility of hedging and diversifying stocks with carbon futures was investigated and the results showed that adding carbon to a stock portfolio improves the risk-adjusted performance overall.
Journal ArticleDOI
Carbon credit futures as an emerging asset: Hedging, diversification and downside risks
TL;DR: In this article , the feasibility of hedging and diversifying stocks with carbon futures was investigated and the results showed that adding carbon to a stock portfolio improves the risk-adjusted performance overall.
Journal ArticleDOI
Optimal Portfolio Allocation between Global Stock Indexes and Safe Haven Assets: Gold versus the Swiss Franc (1999–2021)
TL;DR: In this article , a multivariate Garch DCC model was used to compare the hedging effectiveness of bivariate Swiss Franc-hedged portfolios with those of gold-based portfolios.
Journal ArticleDOI
The equity-oil hedge: A comparison between volatility and alternative risk frameworks
TL;DR: In this article , the authors investigated alternatives to the conventional minimum-variance framework for hedging equity risks with crude oil, and the optimal hedge ratios were calculated for various risk objectives such as volatility, semivariance, and tail risk.
References
More filters
Journal ArticleDOI
On the Relation between the Expected Value and the Volatility of the Nominal Excess Return on Stocks
TL;DR: In this article, a modified GARCH-M model was used to find a negative relation between conditional expected monthly return and conditional variance of monthly return, using seasonal patterns in volatility and nominal interest rates to predict conditional variance.
Journal ArticleDOI
Dynamic Conditional Correlation: A Simple Class of Multivariate Generalized Autoregressive Conditional Heteroskedasticity Models
TL;DR: In this article, a new class of multivariate models called dynamic conditional correlation models is proposed, which have the flexibility of univariate generalized autoregressive conditional heteroskedasticity (GARCH) models coupled with parsimonious parametric models for the correlations.
Journal ArticleDOI
Better to give than to receive: Predictive directional measurement of volatility spillovers
TL;DR: This paper used a generalized vector autoregressive framework to characterize daily volatility spillovers across US stock, bond, foreign exchange and commodities markets, from January 1999 to January 2010, and showed that despite significant volatility fluctuations in all four markets during the sample, cross-market volatility spillover were quite limited until the global financial crisis, which began in 2007.
Journal ArticleDOI
Asymmetric Dynamics in the Correlations of Global Equity and Bond Returns
TL;DR: This paper proposed a new generalized autoregressive conditionally heteroskedastic (GARCH) process, the asymmetric generalized dynamic conditional correlation (AG-DCC) model, which allows for series-specific news impact and smoothing parameters and permits conditional asymmetries in correlation dynamics.
Journal ArticleDOI
Modeling Asymmetric Comovements of Asset Returns
Kenneth F. Kroner,Victor K. Ng +1 more
TL;DR: The authors compare the restrictions imposed by the four most popular multivariate GARCH models, and introduce a set of robust conditional moment tests to detect misspecification, and demonstrate that the choice of a multivariate volatility model can lead to substantially different conclusions in any application that involves forecasting dynamic covariance matrices (like estimating the optimal hedge ratio or deriving the risk minimizing portfolio).