Does gold future hedge global uncertainty in crude oil futures? Evidence from DCC-GARCH model
The crude oil prices experience high volatility during the last two decades. These crises mainly include the global financial crisis (GFC) and the COVID-19 pandemic. Subsequently, the global crude oil market has become highly volatile and suffered substantial losses due to the reduced demand for crude oil during both crises. Investors can rely upon other commodities to hedge their investments and diversify their portfolios. Global events such as GFC and COVID-19 play a critical role in investments and hedge funds to diversify a portfolio. This paper focuses on the empirical investigation of the time-varying correlation between crude oil futures and gold during GFC and the COVID-19 pandemic by employing the DCC GARCH model and found that gold futures do not play as a haven against crude oil futures.
Keywords: Hedge, crude oil, gold futures, DCC GARCH model, GFC, COVID-19.