publications
Article
precious metals, ceral, oil and stock market linkages and portfolio risk management : Evidence from saudi Arabia |
Mensi Walid, 2014 |
Emerging Markets Review, 24, xxx, 101-121, Décembre 2014 |
Résumé
This paper examines the time-varying linkages of a major oil-based frontier stock market with major commodity
futures markets including WTI oil, gold, silver, wheat, corn and rice, and draws implications for portfolio risk
management. For this purpose, we consider the bivariate DCC–FIAPARCH model with and without structural
breaks. Our empirical results reveal evidence of asymmetry and long memory in the conditional volatility and insignificant
dynamic conditional correlations between the considered commodity and Saudi stock markets except
for the silver–Tadawul pair.Moreover,we assess the implications for mixed commodity–stock portfolios and find
strong evidence of diversification benefits, hedging effectiveness and downside risk reductions. This result underscores
the usefulness of including commodities in a traditional portfolio of risk management for investors in the
Saudi market. These findings are also useful for both portfolio risk managers and designers of policies aimed at
using commodities to preserve or stabilize oil exporters' purchasing power
This paper examines the time-varying linkages of a major oil-based frontier stock market with major commodityfutures markets including WTI oil, gold, silver, wheat, corn and rice, and draws implications for portfolio riskmanagement. For this purpose, we consider the bivariate DCC–FIAPARCH model with and without structuralbreaks. Our empirical results reveal evidence of asymmetry and long memory in the conditional volatility and insignificantdynamic conditional correlations between the considered commodity and Saudi stock markets exceptfor the silver–Tadawul pair.Moreover,we assess the implications for mixed commodity–stock portfolios and findstrong evidence of diversification benefits, hedging effectiveness and downside risk reductions. This result underscoresthe usefulness of including commodities in a traditional portfolio of risk management for investors in theSaudi market. These findings are also useful for both portfolio risk managers and designers of policies aimed atusing commodities to preserve or stabilize oil exporters' purchasing power
