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On Hedging Properties of Infrastructure Assets during the Pandemic: What We Learn from Global and Emerging Markets?

Author

Listed:
  • Bambang Susantono

    (Knowledge Management and Sustainable Development, Asian Development Bank, Mandaluyong 1550, Philippines)

  • Gazi Salah Uddin

    (Department of Management and Engineering, Linköping University, 581 83 Linköping, Sweden)

  • Donghyun Park

    (Economic Research and Regional Cooperation Department, Asian Development Bank, Mandaluyong 1550, Philippines)

  • Shu Tian

    (Economic Research and Regional Cooperation Department, Asian Development Bank, Mandaluyong 1550, Philippines)

Abstract

Infrastructure investment is essential for economic development for both developed and developing economies. We analyze the short-term return behavior and portfolio characteristics of the global, regional, and selected Asian countries’ infrastructure indexes during the pandemic over the sample period 3 July 2018 to 1 July 2021. According to the multivariate Glosten, Jagannathan, and Runkle (GJR) Generalized Autoregressive Conditional Heteroscedasticity (GARCH) with dynamic conditional correlation (DCC) model, infrastructure assets are very heterogeneous depending on the corresponding asset classes. Empirical evidence suggests that infrastructure can be treated as a separate asset sub-class within conventional financial assets. Moreover, we quantify the co-movements between returns on various listed infrastructure indexes and major asset classes, including equity, commodity, currency, and bond index returns. We find that infrastructure assets offer hedging potential against the USD index and USD denominated assets.

Suggested Citation

  • Bambang Susantono & Gazi Salah Uddin & Donghyun Park & Shu Tian, 2022. "On Hedging Properties of Infrastructure Assets during the Pandemic: What We Learn from Global and Emerging Markets?," Sustainability, MDPI, vol. 14(5), pages 1-14, March.
    • Handle: RePEc:gam:jsusta:v:14:y:2022:i:5:p:2987-:d:763747
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    References listed on IDEAS

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    1. Zaghum Umar & Adam Zaremba & Ammar Ali Gull & Tatiana Sokolova, 2024. "Beyond traditional financial asset classes: The demand for infrastructure in a multi‐period asset allocation framework," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(3), pages 2581-2592, July.
    2. Hung Quang Bui & Thao Tran & Hung Le-Phuc Nguyen & Duc Hong Vo, 2022. "The impacts of the Covid-19 pandemic, policy responses and macroeconomic fundamentals on market risks across sectors in Vietnam," PLOS ONE, Public Library of Science, vol. 17(8), pages 1-18, August.

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