Harmony in diversity: Exploring connectedness and portfolio strategies among crude oil, gold, traditional and sustainable index
Document Type
Article
Publication Title
Resources Policy
Abstract
The research investigates dynamic connectedness and portfolio strategies among crude oil, gold, global traditional (DJGI) and sustainable (DJSI) indices. The time-varying parameter vector autoregression (TVP-VAR) findings reveal that the average total connectedness among the assets is 33.03%, with the total dynamic connectedness index exhibiting a notable surge during two crises and one stability period. The upsurge exhibited a predominant prevalence of short-run connectedness during crisis periods, notably amidst the COVID-19 pandemic and the Russia-Ukraine war. Conversely, the last and first quarters of 2017 and 2018 manifested as periods of stability, wherein long-term interconnectedness prevailed. Crude oil and gold emerge as the primary recipients of systemic shocks, while traditional and sustainable stock indices act as net transmitters of shocks. The BEKK and DCC GARCH models indicate short- and long-run persistence among the assets. Further, the study calculated hedge ratios and portfolio weights. Our empirical findings indicate that gold serves as a cost-effective hedging asset. Investors should invest more in the traditional stock index than in gold and crude oil to form an optimal portfolio. Notably, the global sustainable index offers results similar to those of the traditional index. Investors in the sustainable index would invest a similar amount for diversification and hedging with other traditional assets as they would for the traditional index.
DOI
10.1016/j.resourpol.2024.105281
Publication Date
10-1-2024
Recommended Citation
Sahoo, Satyaban, "Harmony in diversity: Exploring connectedness and portfolio strategies among crude oil, gold, traditional and sustainable index" (2024). Open Access archive. 10002.
https://impressions.manipal.edu/open-access-archive/10002
