Hedging benefit of safe-haven gold in terms of co-skewness and covariance in stock market

• Main Authors: Sukrit Thongkairat, Woraphon Yamaka, Songsak Sriboonchitta
• Format: Book Series
• Published: 2019
• Subjects: Computer Science; Mathematics
• Online Access: https://www.scopus.com/inward/record.uri?partnerID=HzOxMe3b&scp=85064211684&origin=inward; http://cmuir.cmu.ac.th/jspui/handle/6653943832/65539
• Institution: Chiang Mai University

© Springer Nature Switzerland AG 2019. This study revisits the question of whether or not gold offers a hedging benefit for stock returns. Thus, we examine this benefit in terms of conditional co-skewness in which relate to the selected stock markets, conditional beta risk, and correlation. We use two-step approach to assess the impact of these factors, including Shanghai, GDAXI, FTSE100, S&P500, and Nikkei225 stock index returns. We firstly estimate the Markov-Switching Dynamic Conditional Correlation GARCH (MS-DCC-GARCH) to obtain the correlation, volatility, and covariance which we further use in co-skewness and beta risk computation. In the second step, the linear regression is employed to investigate the effect of the co-skewness and beta risk on stock returns and examine hedging benefit of gold on stocks. We find some evidences that gold can be acted as a safe haven asset for some major stock markets.