ERF 27th Annual Conference

Hedging the Risks of MENA Stock Markets with Gold: Evidence from the Spectral Approach

No.

ERF27_

Publisher

ERF

Date

May, 2021

Topic

C6. Mathematical Methods

C1. Econometric and Statistical Methods and Methodology

G1. General Financial Markets

In this paper, we contribute to the old debate on the dynamic correlation between gold and stock markets by considering a spectral approach within the framework of portfolio hedging. Specifically, we consider eight MENA stock markets (Tunisia, Egypt, Morocco, Jordan, UAE, Saudi Arabia, Qatar, and Oman) and examine the optimal composition between gold and the stock market index, with a minimum portfolio risk and a high expected return. Based on the spectral approach, we propose seven portfolio structures and evaluate them through a comparison with the conventional DCC-GARCH method. The main results show that the spectral-based approach outperforms the DCC-GARCH method. In fact, the optimal gold-stock composition depends on the spectral density of each stock market index, where a stock market index with a stable spectral density requires more investments in gold than a stock market index with an unstable spectral density.
Hedging the Risks of MENA Stock Markets with Gold: Evidence from the Spectral Approach

Authors

Awatef Ourir

University of Jendouba

Hedging the Risks of MENA Stock Markets with Gold: Evidence from the Spectral Approach

Authors

Elie Bouri

Associate Professor of Finance, School of Business...

Hedging the Risks of MENA Stock Markets with Gold: Evidence from the Spectral Approach

Research Fellows

Essahbi Essaadi

Assistant Professor, University of Manouba, Tunisia