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Black Swan Events and Safe Havens: The role of Gold in Globally Integrated Emerging Markets

Author

Listed:
  • 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. Whilst 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 amongst the investigated markets.

Suggested Citation

  • Bekiros, Stelios & Boubaker, Sabri & Nguyen, Duc Khuong & Uddin, Gazi Salah, 2015. "Black Swan Events and Safe Havens: The role of Gold in Globally Integrated Emerging Markets," MPRA Paper 75740, University Library of Munich, Germany, revised Nov 2016.
    • Handle: RePEc:pra:mprapa:75740
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    More about this item

    Keywords

    Equity markets; Copulas; Gold; Time-scale analysis.;
    All these keywords.

    JEL classification:

    • 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
    • G1 - Financial Economics - - General Financial Markets

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