Assessing the hedging potential of gold and other precious metals against uncertainty due to epidemics and pandemics.

Autor: Sikiru AA; Research and Statistics Department, West African Monetary Agency, Freetown, Sierra Leone.; Monetary Policy Department, Central Bank of Nigeria, Abuja, Nigeria., Salisu AA; Centre for Econometric and Allied Research, University of Ibadan, Ibadan, Nigeria.
Jazyk: angličtina
Zdroj: Quality & quantity [Qual Quant] 2022; Vol. 56 (4), pp. 2199-2214. Date of Electronic Publication: 2021 Aug 06.
DOI: 10.1007/s11135-021-01214-7
Abstrakt: We assess the hedging capabilities of four prominent precious metals namely gold, palladium, platinum and silver against market risks due to epidemics and pandemics. The research objective is informed by the COVID-19 pandemic which amplifies health risks with attendant concerns for financial markets. We utilize the health-related uncertainty index developed by Baker et al. (Equity market volatility: infectious disease tracker [INFECTDISEMVTRACK], 2020) which measures uncertainty in the financial markets due to infectious diseases including the COVID-19 pandemic and construct a predictive model that accommodates the salient features of both the predictand and predictor series. Our results support the safe haven property only for gold before and during the COVID-19 pandemic. We push the analysis further for in-sample and out-of-sample forecast evaluation and find that accounting for uncertainty due to infectious diseases improves the forecast of the four precious metals relative to the benchmark model (historical average). We highlight for investors that the gold market remains the safest market among the precious metals particularly during the COVID-19 pandemic.
Competing Interests: Conflict of interestThe author does not have any conflict of interest to declare.
(© The Author(s), under exclusive licence to Springer Nature B.V. 2021.)
Databáze: MEDLINE
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