Information transmission and hedging effectiveness for the pairs crude oil-gold and crude oil-Bitcoin during the COVID-19 outbreak

【Author】 Yousaf, Imran; Ali, Shoaib; Bouri, Elie; Saeed, Tareq

【Source】ECONOMIC RESEARCH-EKONOMSKA ISTRAZIVANJA

【影响因子】3.080

【Abstract】This study uses hourly data to analyse the return and volatility transmission of oil-gold and oil-Bitcoin pairs during the pre-COVID-19 and COVID-19 periods. The results show that the return transmissions vary across the two periods for both pairs. There is a unidirectional volatility spill-over from gold to oil in the pre-COVID-19 period, and from oil to gold during the COVID-19 period. There is a significant volatility spill-over from Bitcoin to oil during the pre-COVID-19 period, whereas no evidence of volatility spill-over between oil and Bitcoin is shown during the COVID-19 period. Based on optimal weights, investors should increase their investments in, (a) gold for a portfolio of oil-gold, and (b) Bitcoin for a portfolio of oil-Bitcoin during the COVID-19 period. All hedge ratios are higher during the COVID-19 period, implying a higher hedging cost compared to the pre-COVID-19 period. The results of hedging effectiveness reveal that the risk-adjusted returns can be improved by constructing a portfolio of oil-gold and oil-Bitcoin during both sample periods. Further results reveal that gold is a strong safe haven and a hedge for the oil market, while Bitcoin serves as a diversifier for the oil market during the COVID-19 period.

【Keywords】Crude oil; gold; Bitcoin; return and volatility spill-overs; hedging effectiveness; safe haven; COVID-19

【发表时间】2021

【收录时间】2022-01-02

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