Oil as Hedge, Safe-Haven, and Diversifier for Conventional Currencies
The research investigates the safe-haven, hedging, and diversification function of crude oil for conventional currencies, among which five are major oil exporters, and six are major oil importers. In order to model time-varying dynamic correlations between crude oil and currencies, the study uses th...
| Main Authors: | , , , , |
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| Format: | Article |
| Language: | English |
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MDPI AG
2020-08-01
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| Series: | Energies |
| Subjects: | |
| Online Access: | https://www.mdpi.com/1996-1073/13/17/4354 |
| _version_ | 1797556100366598144 |
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| author | Changyu Liu Muhammad Abubakr Naeem Mobeen Ur Rehman Saqib Farid Syed Jawad Hussain Shahzad |
| author_facet | Changyu Liu Muhammad Abubakr Naeem Mobeen Ur Rehman Saqib Farid Syed Jawad Hussain Shahzad |
| author_sort | Changyu Liu |
| collection | DOAJ |
| description | The research investigates the safe-haven, hedging, and diversification function of crude oil for conventional currencies, among which five are major oil exporters, and six are major oil importers. In order to model time-varying dynamic correlations between crude oil and currencies, the study uses the Asymmetric-DCC model. The findings highlight low or negative correlations, especially during the crisis period. Next, we employ a quantile based regression framework and conclude distinct safe-haven and hedge functions of oil for major currencies. We provide additional evidence on the safe-haven, hedging, and diversification function of crude oil using the cross-quantilogram framework. The findings of out of sample analysis illustrate that the hedging effectiveness of oil is greater for oil-exporting countries. In addition, the conditional diversification benefit of oil is higher in the lower quantiles, i.e., when both foreign exchange and oil markets are in a bearish state. Finally, implications for investors, portfolio managers, and policymakers are further discussed. |
| first_indexed | 2024-03-10T16:56:57Z |
| format | Article |
| id | doaj.art-79e530835cc34c3e954b93afd4a83734 |
| institution | Directory Open Access Journal |
| issn | 1996-1073 |
| language | English |
| last_indexed | 2024-03-10T16:56:57Z |
| publishDate | 2020-08-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Energies |
| spelling | doaj.art-79e530835cc34c3e954b93afd4a837342023-11-20T11:06:34ZengMDPI AGEnergies1996-10732020-08-011317435410.3390/en13174354Oil as Hedge, Safe-Haven, and Diversifier for Conventional CurrenciesChangyu Liu0Muhammad Abubakr Naeem1Mobeen Ur Rehman2Saqib Farid3Syed Jawad Hussain Shahzad4Business School, Shandong Normal University, Jinan 250014, ChinaSchool of Economics and Finance, Massey University, Auckland 24300, New ZealandDepartment of Accounting, Analysis and Audit, South Ural State University, 454080 Chelyabinsk, RussiaSchool of Business & Economics, University of Management & Technology, Lahore 54770, PakistanDepartment of Accounting, Analysis and Audit, South Ural State University, 454080 Chelyabinsk, RussiaThe research investigates the safe-haven, hedging, and diversification function of crude oil for conventional currencies, among which five are major oil exporters, and six are major oil importers. In order to model time-varying dynamic correlations between crude oil and currencies, the study uses the Asymmetric-DCC model. The findings highlight low or negative correlations, especially during the crisis period. Next, we employ a quantile based regression framework and conclude distinct safe-haven and hedge functions of oil for major currencies. We provide additional evidence on the safe-haven, hedging, and diversification function of crude oil using the cross-quantilogram framework. The findings of out of sample analysis illustrate that the hedging effectiveness of oil is greater for oil-exporting countries. In addition, the conditional diversification benefit of oil is higher in the lower quantiles, i.e., when both foreign exchange and oil markets are in a bearish state. Finally, implications for investors, portfolio managers, and policymakers are further discussed.https://www.mdpi.com/1996-1073/13/17/4354hedgesafe havencrude oilcurrency |
| spellingShingle | Changyu Liu Muhammad Abubakr Naeem Mobeen Ur Rehman Saqib Farid Syed Jawad Hussain Shahzad Oil as Hedge, Safe-Haven, and Diversifier for Conventional Currencies Energies hedge safe haven crude oil currency |
| title | Oil as Hedge, Safe-Haven, and Diversifier for Conventional Currencies |
| title_full | Oil as Hedge, Safe-Haven, and Diversifier for Conventional Currencies |
| title_fullStr | Oil as Hedge, Safe-Haven, and Diversifier for Conventional Currencies |
| title_full_unstemmed | Oil as Hedge, Safe-Haven, and Diversifier for Conventional Currencies |
| title_short | Oil as Hedge, Safe-Haven, and Diversifier for Conventional Currencies |
| title_sort | oil as hedge safe haven and diversifier for conventional currencies |
| topic | hedge safe haven crude oil currency |
| url | https://www.mdpi.com/1996-1073/13/17/4354 |
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