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Black swan events and safe havens: The role of gold in globally integrated emerging markets

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  • Bekiros, Stelios
  • Boubaker, Sabri
  • Nguyen, Duc Khuong
  • Uddin, Gazi Salah

Abstract

There is evidence to suggest that gold acts as both a hedge and a safe haven for equity markets over recent years, and particularly during crises periods. Our work extends the recent literature on hedging and diversification roles of gold by analyzing its interaction with the stock markets of the leading emerging economies, the BRICS. While they generally exhibit a high growth rate, these economies still experience a pronounced vulnerability to external shocks, particularly to commodity price fluctuations. Using a multi-scale wavelet approach and a GARCH-based copula methodology, we mainly show evidence of: (i) the time-scale co-evolvement patterns between BRICS stock markets and gold market, with some profound regions of concentrated extreme variations; and (ii) a strong time-varying asymmetric dependence structure between those markets. These findings are essential for risk diversification and portfolio hedging strategies among the investigated markets.

Suggested Citation

  • Bekiros, Stelios & Boubaker, Sabri & Nguyen, Duc Khuong & Uddin, Gazi Salah, 2017. "Black swan events and safe havens: The role of gold in globally integrated emerging markets," Journal of International Money and Finance, Elsevier, vol. 73(PB), pages 317-334.
  • Handle: RePEc:eee:jimfin:v:73:y:2017:i:pb:p:317-334
    DOI: 10.1016/j.jimonfin.2017.02.010
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    2. Hussain Shahzad, Syed Jawad & Raza, Naveed & Shahbaz, Muhammad & Ali, Azwadi, 2017. "Dependence of stock markets with gold and bonds under bullish and bearish market states," Resources Policy, Elsevier, vol. 52(C), pages 308-319.
    3. repec:eee:ememar:v:35:y:2018:i:c:p:69-90 is not listed on IDEAS
    4. repec:eee:ecmode:v:70:y:2018:i:c:p:301-309 is not listed on IDEAS
    5. repec:eee:phsmap:v:495:y:2018:i:c:p:30-39 is not listed on IDEAS
    6. repec:eee:finlet:v:23:y:2017:i:c:p:23-30 is not listed on IDEAS
    7. repec:eee:ecmode:v:66:y:2017:i:c:p:184-200 is not listed on IDEAS
    8. repec:eee:finana:v:57:y:2018:i:c:p:1-12 is not listed on IDEAS
    9. repec:eee:ecmode:v:72:y:2018:i:c:p:278-295 is not listed on IDEAS

    More about this item

    Keywords

    Equity markets; Copulas; Gold; Time-scale analysis;

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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