Dynamic risk spillovers between gold, oil prices and conventional, sustainability and Islamic equity aggregates and sectors with portfolio implications
Author
Mensi, W.
Hammoudeh, S.
Al-Jarrah, I. M. W.
Sensoy A.
Kang, S. H.
Date
2017Source Title
Energy Economics
Print ISSN
0140-9883
Publisher
Elsevier B.V.
Volume
67
Pages
454 - 475
Language
English
Type
ArticleItem Usage Stats
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Abstract
This paper investigates the time-varying equicorrelations and risk spillovers between crude oil, gold and the Dow Jones conventional, sustainability and Islamic stock index aggregates and 10 associated disaggregated Islamic sector stock indexes (basic materials, consumer services, consumer goods, energy, financials, health care, technology, industrials, telecommunications and utilities), using the multivariate DECO-FIAPARCH model and the spillover index of Diebold and Yilmaz (2012). We also conduct a risk management analysis at the sector level for commodity-Islamic stock sector index portfolios, using different risk exposure measures. For comparison purposes, we add the aggregate conventional Dow Jones global index and the Dow Jones sustainability world index. The results show evidence of time-varying risk spillovers between these markets. Moreover, there are increases in the correlations among the markets in the aftermath of the 2008–2009 GFC. Further, the oil, gold, energy, financial, technology and telecommunications sectors are net receivers of risk spillovers, while the sustainability and conventional aggregate DJIM indexes as well as the remaining Islamic stock sectors are net contributors of risk spillovers. Finally, we provide evidence that gold offers better portfolio diversification benefits and downside risk reductions than oil. © 2017 Elsevier B.V.
Keywords
Commodity marketsDownside risk reductions
Islamic equity markets
Spillovers
Sustainability and conventional equity indexes
Aggregates
Commerce
Crude oil
Gold
Health risks
Risk analysis
Risk assessment
Risk management
Sustainable development
Consumer services
Dow Jones Global Indexes
Downside risks
Equity markets
Management analysis
Portfolio diversification
Spillovers
Time-varying risks
Financial markets