Do hedge and merger arbitrage funds actually hedge? A time-varying volatility spillover approach

Papathanasiou, Spyros; Vasiliou, Dimitrios; Magoutas, Anastasios; Koutsokostas, Drosos

doi:10.1016/j.frl.2021.102088

Cited by 23 publications

(9 citation statements)

References 21 publications

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“…However, during the last month of the sample period, we observe a rise in volatility spillovers from 50 to 57%, reaching their peak, undoubtedly due to the start of the Russia–Ukraine war, along with the concomitant rise in inflation rates due to conflict. These results are aligned with the existing literature reporting that connectedness strengthens during turbulent periods (Umar et al 2020 ; Wen and Wang 2020 ; Balcilar et al 2021 ; Samitas et al 2021 ; Zhang et al 2021 ; Kumar et al 2022 ; Mensi et al 2022 ; Papathanasiou et al 2022c ; Yousaf and Yarovaya 2022 ). More specifically, we find evidence that the impact of COVID-19 on volatility spillovers exceeded the one caused by the European financial crisis, as outlined by Gunay ( 2021 ) and Zhang and Hamori ( 2021 ).…”

Section: Resultssupporting

confidence: 91%

“…On the other hand, our findings are contrary to the findings of Liow ( 2015 ) and Liow et al ( 2018 ) who document real estate as a net receiver of volatility spillovers. Dynamic connectedness showed accretion during periods of turmoil, such as the US–China trade war, COVID-19 and the Russia–Ukraine war, indicating that volatility spillovers are prone to extraneous shocks, as cited by the literature (Umar et al 2020 ; Wen and Wang 2020 ; Balcilar et al 2021 ; Samitas et al 2021 ; Zhang et al 2021 ; Kumar et al 2022 ; Mensi et al 2022; Papathanasiou et al 2022c ; Yousaf and Yarovaya 2022 ). Moreover, the empirical results indicate that the short position in the volatility of TIPS is proved to be an efficient hedge for all the sampled assets, with the exception of short-term Treasury bonds, and their hedging ability was enhanced during COVID-19.…”

Section: Discussionmentioning

confidence: 91%

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Can treasury inflation-protected securities safeguard investors from outward risk spillovers? A portfolio hedging strategy through the prism of COVID-19

et al. 2022

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Documenting the interlinkages among assets that are widely used to hedge against inflation is crucial for investors, as the necessity to protect the investment portfolio is stronger under inflationary conditions. For this purpose, we investigate the volatility spillovers between treasury inflation-protected securities (TIPS) and a battery of other assets perceived as inflation hedges, including bonds, gold, real estate, oil and equities. The applied methodology comprehends the time-varying parameter vector autoregressive (TVP-VAR) extension of the Diebold and Yilmaz (Int J Forecast 28:57–66, 2012, 10.1016/j.ijforecast.2011.02.006) approach for the period 1/1/2010–3/31/2022. Our results indicate that the assets under consideration are moderately interconnected and subjected to several exogenous shocks, such as the US–China trade war, the COVID-19 pandemic and the Russia–Ukraine war. Furthermore, we assess the hedging effectiveness of TIPS against each asset by estimating hedge ratios and optimal portfolios weights, before and after the spread of COVID-19 pandemic, by using conditional variance estimations (DCC-GARCH). The empirical findings show that the short position in the volatility of TIPS is proved to be an excellent hedge for all the sampled assets, with the exception of short-term Treasury bonds, and their hedging ability was improved during COVID-19.

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Section: Resultssupporting

confidence: 91%

Section: Discussionmentioning

confidence: 91%

Can treasury inflation-protected securities safeguard investors from outward risk spillovers? A portfolio hedging strategy through the prism of COVID-19

et al. 2022

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“…Third, the existing studies are difficult to generalize as these focus on different geographies covering different sample periods. For example, the studies such as Manelli et al (2020), Nahmer (2020) and Papathanasiou et al (2021) focus on one specific country, and hence the generalization of the findings becomes challenging. Studies focusing on QRFM 15,1 similar sample periods, units of analysis and similar research methods will provide evidence of the consistency of performance of alternative investments.…”

Section: Research Gaps and Directions For Future Researchmentioning

confidence: 99%

The potential of alternative investments as an asset class: a thematic and bibliometric review

Mundi

Kumar

2022

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Purpose This paper aims to review, systematize and integrate existing research on alternative investments. This study conducts performance analysis comprising production timeline, country-wise contributions, analysis of sources, affiliations, the geography of authors and citations of studies on alternative investments. Design/methodology/approach This study adopts a thematic and bibliometric analysis methodology on 570 papers identified from mainstream literature on alternative investments. This study provides an analysis of science mapping, including co-citation analysis, bibliometric coupling, word analysis and trending topics on alternative investments. In addition, the study presents thematic analysis by classifying existing studies into nine themes. Findings Alternative investments provide diversification benefits and play a critical role in portfolio construction, and the research on alternative investments has gained momentum in recent times. This study finds that hedge funds, private equity, artwork, collectibles, commodities, fine wine and venture capital have remained prominent themes in the field. Investments in cryptocurrencies are an emerging area in the research on alternative investments. Research limitations/implications This study limits itself to the papers published in the area of finance and economics listed on the Scopus database. Originality/value This study provides quantitative bibliometric analysis and thematic analysis of the extant literature on alternative investments and identifies the areas that could be developed to advance research on alternative investments.

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“…The literature defines an asset bubble as a steep increase in an asset's price without any fundamental economic reason (Dreger & Zhang, 2013; Papathanasiou, Vasiliou, et al, 2021) which usually ends with a bubble burst, that is, a dramatic drop in the asset's price. Previous literature has provided evidence of the existence of bubble formulation in the cryptocurrency market (Cheung et al, 2015; Corbet et al, 2018a; Fry & Cheah, 2016).…”

Section: Literature Reviewmentioning

confidence: 99%

Did cryptocurrencies exhibit log‐periodic power law signature during the second wave of COVID‐19?

2022

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Many studies have associated cryptocurrencies with bubbles, especially during stressed market conditions such as the recent outbreak of the second wave of COVID‐19. Although the majority of studies have focused on Bitcoin, we investigate the predictability of bubble formation in the cryptocurrency market by using the log‐periodic power law and we uncover some important stylized facts of this market. Our sample consists of data for a selection of 15 cryptocurrencies for the period between 1 January 2021 and 1 September 2021 which coincides with the second wave of COVID‐19. We analyse 86 speculative bubbles, and we find that the cryptocurrency market has three times higher drawdown over equities during stressed market conditions.

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Do hedge and merger arbitrage funds actually hedge? A time-varying volatility spillover approach

Cited by 23 publications

References 21 publications

Can treasury inflation-protected securities safeguard investors from outward risk spillovers? A portfolio hedging strategy through the prism of COVID-19

Can treasury inflation-protected securities safeguard investors from outward risk spillovers? A portfolio hedging strategy through the prism of COVID-19

The potential of alternative investments as an asset class: a thematic and bibliometric review

Did cryptocurrencies exhibit log‐periodic power law signature during the second wave of COVID‐19?

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