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FAANG Stocks, Gold, and Islamic Equity: Implications for Portfolio Management during COVID-19

Author

Listed:
  • Kashif Saleem

    (Faculty of Business, University of Wollongong in Dubai, Dubai P.O. Box 20183, United Arab Emirates)

  • Osama AlHares

    (Faculty of Business, University of Wollongong in Dubai, Dubai P.O. Box 20183, United Arab Emirates)

  • Haroon Khan

    (Faculty of Business, University of Wollongong in Dubai, Dubai P.O. Box 20183, United Arab Emirates)

  • Omar Farooq

    (School of Business, ADA University, Baku P.O. Box AZ1008, Azerbaijan)

Abstract

During the COVID-19 pandemic, technology stocks, such as FAANG stocks (Facebook, Amazon, Apple, Netflix, and Google), attracted the attention of global investors due to the vast use of technology in daily business. However, technology stocks are generally considered risky stocks; hence, efficient risk management is required to construct an optimal portfolio. In this study, we investigate the volatility spillovers and dynamic conditional correlations among the daily returns of FAANG company stocks, gold, and sharia-compliant equity to construct the optimal portfolio weights and hedge ratios during the COVID-19 pandemic period by utilizing a multivariate GARCH framework. The dynamic conditional correlations reveal that both gold and sharia-compliant equities exhibit lower correlations with FAANG stocks during the COVID-19 pandemic, implying opportunities for portfolio diversification. The findings indicate that gold and shariah-compliant equity are good candidates to hedge FAANG stocks. These findings are highly relevant for international investors, asset managers, hedgers, and portfolio managers.

Suggested Citation

  • Kashif Saleem & Osama AlHares & Haroon Khan & Omar Farooq, 2023. "FAANG Stocks, Gold, and Islamic Equity: Implications for Portfolio Management during COVID-19," Risks, MDPI, vol. 11(1), pages 1-11, January.
    • Handle: RePEc:gam:jrisks:v:11:y:2023:i:1:p:19-:d:1032316
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    References listed on IDEAS

    as
    1. Engle, Robert F. & Kroner, Kenneth F., 1995. "Multivariate Simultaneous Generalized ARCH," Econometric Theory, Cambridge University Press, vol. 11(1), pages 122-150, February.
    2. Stefano Ramelli & Alexander F. Wagner, 2020. "Feverish Stock Price Reactions to COVID-19," Swiss Finance Institute Research Paper Series 20-12, Swiss Finance Institute.
    3. Mirza, Nawazish & Abbas Rizvi, Syed Kumail & Saba, Irum & Naqvi, Bushra & Yarovaya, Larisa, 2022. "The resilience of Islamic equity funds during COVID-19: Evidence from risk adjusted performance, investment styles and volatility timing," International Review of Economics & Finance, Elsevier, vol. 77(C), pages 276-295.
    4. Wagner, Alexander F. & Ramelli, Stefano, 2020. "Feverish Stock Price Reactions to COVID-19," CEPR Discussion Papers 14511, C.E.P.R. Discussion Papers.
    5. Stefano Ramelli & Alexander F Wagner, 2020. "Feverish Stock Price Reactions to COVID-19," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 9(3), pages 622-655.
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