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Connectedness and hedging between gold and Islamic securities: A new evidence from time-frequency domain approaches

Author

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  • Maghyereh, Aktham I.
  • Abdoh, Hussein
  • Awartani, Basel

Abstract

This paper investigates the dynamic connectedness between gold, sukuk and Islamic equities at multiple investment horizons, it also computes optimal hedge ratios and portfolio weights for these assets. Our findings suggest that gold hedges the risk of sukuk in the short and medium terms, and that gold plays an average but stable role in hedging and diversifying Islamic equities across all investment horizons. Moreover, we document a diversification benefits of portfolios combining gold and Islamic equities in the short term. These empirical findings highlight the important role that gold plays in the diversification and hedging of Islamic assets.

Suggested Citation

  • Maghyereh, Aktham I. & Abdoh, Hussein & Awartani, Basel, 2019. "Connectedness and hedging between gold and Islamic securities: A new evidence from time-frequency domain approaches," Pacific-Basin Finance Journal, Elsevier, vol. 54(C), pages 13-28.
  • Handle: RePEc:eee:pacfin:v:54:y:2019:i:c:p:13-28
    DOI: 10.1016/j.pacfin.2019.01.008
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    References listed on IDEAS

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    More about this item

    Keywords

    Sharia-compliant stocks; Sukuk; Gold; Optimal hedge ratio; Connectedness; Frequency; Wavelet analysis;

    JEL classification:

    • 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
    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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