Volatility forecasting, downside risk, and diversification benefits of Bitcoin and oil and international commodity markets: A comparative analysis with yellow metal

【Author】 Al-Yahyaee, Khamis Hamed; Mensi, Walid; Al-Jarrah, Idries Mohammad Wanas; Hamdi, Atef; Kang, Sang Hoon

【Source】NORTH AMERICAN JOURNAL OF ECONOMICS AND FINANCE

【影响因子】3.136

【Abstract】This study examines the diversification and hedging properties of Bitcoin (BTC) and gold assets for oil and S&P GSCI investors. We model and forecast the volatility performance of the pairs BTC-oil, gold-oil, BTC-S&P GSCI, and gold-GSCI using five bivariate DCC-GARCH family models, two popular forecasting measures (MSE and MAE), the Diebold and Mariano (1995) test, and different risk measures (value-at-risk, expected shortfall, semivariance, and regret) for different portfolios. We find that BTC and gold provide diversification benefits for oil and S&P GSCI. Moreover, by comparing the fitting and forecast performances of the five GARCH models, we find that the standard GARCH model is the best for the gold-oil and BTC-S&P GSCI pairs, while the HYGARCH model is the best for the BTC-oil and gold-S&P GSCI pairs regardless of the time horizon. Finally, we find strong evidence of hedging effectiveness and downside risk reductions, confirming the importance of BTC and gold in oil and S&P GSCI portfolio management.

【Keywords】Bitcoin; Commodity markets; Forecasting; Downside risk; Multivariate GARCH models

【发表时间】2019 JUL

【收录时间】2022-01-02

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