Volatility spillovers and hedging effectiveness between the oil market and Eurozone sectors: A tale of two crises

Belhassine, Olfa

doi:10.1016/j.ribaf.2020.101195

Cited by 35 publications

(14 citation statements)

References 56 publications

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“…By utilising a DCC-GARCH model-based hedging strategy, they find that both crude oil and gold can be cheap hedging tools. Belhassine (2020) applied multiple Eurozone sectoral indices to hedge Brent crude oil by utilising a time-varying hedging strategy based on a vector autoregressive (VAR)-BEKK-GARCH model. They focus on the dynamics of the time-varying hedge ratios, identifying that low-cost hedges could be constructed by small hedge ratios.…”

Section: Previous Literaturementioning

confidence: 99%

The influence of the COVID-19 pandemic on the hedging functionality of Chinese financial markets

Corbet

Hou

et al. 2022

Research in International Business and Finance

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In this paper, we investigate both constant and time-varying hedge ratios in terms of the effectiveness of CSI300 index futures during the COVID-19 crisis. Using naïve, OLS and EC/ROLS strategies to estimate constant hedge ratios, results indicate that the CSI300 spot index presents decreased effectiveness using the naïve hedging strategy; however, increased effectiveness of OLS and EC hedge ratios are identified. Differential behaviour is identified when considering five newly introduced COVID-19 concept-based stock indices. Time-varying hedge ratios indicate the weakened effectiveness, ranging between 20% and 40% variance reduction. Evidence suggests that the capability of the CSI300 index futures to hedge against the risks of the COVID-19 is impaired, regardless of whether constant or time-varying hedge ratios are used. Such results provide important implications to both local and foreign investors in the Chinese stock market.

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Section: Previous Literaturementioning

confidence: 99%

The influence of the COVID-19 pandemic on the hedging functionality of Chinese financial markets

Corbet

Hou

et al. 2022

Research in International Business and Finance

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“…This result is consistent with Akhtaruzzaman et al (2020) , who studied the COVID-19 crisis effects on HR of financial and non-financial Chinese firms with G7 countries. Batten et al (2019) and Belhassine (2020) also found that the GFC increased the studied HRs. Euro STOXX 50 only showed an increase in its HR standard deviation, suggesting that hedging activity has become more expensive after the crisis.…”

Section: Resultsmentioning

confidence: 70%

“…Regarding the average OPW of Bitcoin, it was 7.20% in the stable period and increased significantly in the post-COVID-19 period to 16.51%. However, we can observe a drastic and significant decrease in the Bitcoin OPW standard deviation, meaning that Bitcoin is the cheapest safe haven for SEE because it does not require frequent portfolio rebalancing that could be expensive ( Belhassine, 2020 , Junttila et al, 2018 , Olson et al, 2017 ).…”

Section: Resultsmentioning

confidence: 89%

Contagion and portfolio management in times of COVID-19

Belhassine

Karamti

2021

Economic Analysis and Policy

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This paper aims to investigate the COVID-19 pandemic impacts on the interconnectedness between the Chinese stock market and major financial and commodity markets—gold, silver, Bitcoin, WTI, S&P 500, and Euro STOXX 50—and analyze the portfolio design implications. Using daily data from 2018 to 2021, we first apply the wavelet power spectrum (WPS) to visualize volatility shifts. In contrast to previous research, we empirically identify the precise COVID-19 outbreak dates for each market using the Perron (1997) breakpoint test. Finally, we employ the bivariate DCC-GARCH model to analyze the connectedness between markets. The findings reveal that the COVID-19 pandemic caused volatility shifts of different intensities for all of the studied markets. Moreover, each return series exhibits one break date, which is specific to each market and corresponds to a distinct COVID-19-related event. Correlations, hedge ratios, and optimal portfolio weights changed significantly after the COVID-19 outbreak. There is evidence of contagion effects between the Chinese stock market and S&P 500, Euro STOXX 50, gold, and silver. Interestingly, the latter two assets lost their safe haven property with SSE. However, WTI and Bitcoin act as safe havens against SSE risks.

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“…In order to study the time-varying volatility spillover, the sliding window method is used to divide the whole sample into 5 sub-period. According to the literature, we find that the window size ranges from about 200 to 1000 when using GARCH family models [30] , [31] , [32] , [33] . For a window with N observations, the overlap data can range from 0 to N-1 [32] , [34] .…”

Section: Methodsmentioning

confidence: 99%

The time-varying spillover effect of China’s stock market during the COVID-19 pandemic

Liu

Chen

et al. 2022

Physica A: Statistical Mechanics and its Applications

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Volatility spillovers and hedging effectiveness between the oil market and Eurozone sectors: A tale of two crises

Cited by 35 publications

References 56 publications

The influence of the COVID-19 pandemic on the hedging functionality of Chinese financial markets

The influence of the COVID-19 pandemic on the hedging functionality of Chinese financial markets

Contagion and portfolio management in times of COVID-19

The time-varying spillover effect of China’s stock market during the COVID-19 pandemic

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