Hedging stock market prices with WTI, Gold, VIX and cryptocurrencies: a comparison between DCC, ADCC and GO-GARCH models

【Author】 Fakhfekh, Mohamed; Jeribi, Ahmed; Ghorbel, Ahmed; Hachicha, Nejib

【Source】INTERNATIONAL JOURNAL OF EMERGING MARKETS

【影响因子】3.422

【Abstract】Purpose In a first place, the present paper is designed to examine the dynamic correlations persistent between five cryptocurrencies, WTI, Gold, VIX and four stock markets (SP500, FTSE, NIKKEI and MSCIEM). In a second place, it investigates the relevant optimal hedging strategy. Design/methodology/approach Empirically, the authors examine how WTI, Gold, VIX and five cryptocurrencies can be applicable to hedge the four stock markets. Three variants of multivariate GARCH models (DCC, ADCC and GO-GARCH) are implemented to estimate dynamic optimal hedge ratios. Findings The reached findings prove that both of the Bitcoin and Gold turn out to display remarkable hedging commodity features, while the other assets appear to demonstrate a rather noticeable disposition to act as diversifiers. Moreover, the results show that the VIX turns out to stand as the most effectively appropriate instrument, fit for hedging the stock market indices various related refits. Furthermore, the results prove that the hedging strategy instrument was indifferent for FTSE and NIKKEI stock while for the American and emerging markets, the hedging strategy was reversed from the pre-cryptocurrency crash to the during cryptocurrency crash period. Originality/value The first paper's empirical contribution lies in analyzing emerging cross-hedge ratios with financial assets and compare hedging effectiveness within the period of crash and the period before Bitcoin crash as well as the sensitivity of results to refits choose to compare between short term hedging strategy and long-term one.

【Keywords】Cryptocurrencies; Stock market indices; Commodities; VIX; Multivariate GARCH models; Optimal hedge ratios; Hedging effectiveness; G10; G11; G14; G15

【发表时间】2021

【收录时间】2022-01-02

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