Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/239638 
Year of Publication: 
2021
Citation: 
[Journal:] Journal of Risk and Financial Management [ISSN:] 1911-8074 [Volume:] 14 [Issue:] 5 [Publisher:] MDPI [Place:] Basel [Year:] 2021 [Pages:] 1-29
Publisher: 
MDPI, Basel
Abstract: 
This paper aims to examine the volatility spillover, diversification benefits, and hedge ratios between U.S. stock markets and different financial variables and commodities during the pre-COVID-19 and COVID-19 crisis, using daily data and multivariate GARCH models. Our results indicate that the risk spillover has reached the highest level during the COVID-19 period, compared to the pre-COVID period, which means that the COVID-19 pandemic enforced the risk spillover between U.S. stock markets and the remains assets. We confirm the economic benefit of diversification in both tranquil and crisis periods (e.g., a negative dynamic conditional correlation between the VIX and SP500). Moreover, the hedging analysis exhibits that the Dow Jones Islamic has the highest hedging effectiveness either before or during the recent COVID19 crisis, offering better resistance to uncertainty caused by unpredictable turmoil such as the COVID19 outbreak. Our finding may have some implications for portfolio managers and investors to reduce their exposure to the risk in their portfolio construction.
Subjects: 
Bitcoin
COVID-19
dynamic conditional correlation
hedging
Islamic indices
JEL: 
G12
G14
G15
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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