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1.
Energy Strategy Reviews ; 44:100979, 2022.
Article in English | ScienceDirect | ID: covidwho-2068972

ABSTRACT

Natural gas plays important role in the global energy sources, hence understanding its price behavior is important to various economic agents. This study examined whether rational bubbles existed in the three major natural gas markets by employing Fourier unit root tests and a nonparametric rank test for cointegration. Data comprises monthly data on the three largest natural gas indices in the world – Henry hub (USA), European and Asian (Japan) for the period from 2000M1–2021M12. The results reveal that the efficient market hypothesis holds in the market ruling out the possibility of arbitrage opportunities. The rank test estimates at 0.009677, 0.009872, and 0.009657 at 1% significant level for the pre-COVID-19 sample period, and at 0.009671, 0.09874, and 0.009661 at 1% significant level for the full sample period contradict the rational explosive bubble framework that suggests deviation of prices from the fundamentals. This suggests that natural gas prices markets are efficient at least in the weak form, the implication is that disruptions in the market will be short-lived as the market will fundamentally adjust back to equilibrium.

2.
Resour Policy ; 70: 101897, 2021 Mar.
Article in English | MEDLINE | ID: covidwho-845946

ABSTRACT

This paper assesses the role of gold as a safe haven or hedge against crude oil price risks. We employ the asymmetric VARMA-GARCH model, using daily data from January 2016 to August 2020. To account for the impact of COVID-19 pandemic, we partitioned the data into two to reflect the periods before and during the pandemic. Our empirical results find gold as a significant safe haven against oil price risks. The optimal portfolio and hedging analyses conducted also validate the hedging effectiveness of gold against risk associated with oil. The robustness of our results is further confirmed using three other prominent precious metals - silver, platinum, and palladium. In sum, our results are useful for investors and portfolio managers that are desirous of using gold and other precious metals as portfolio rebalancing tools to minimize or circumvent risks associated with volatile oil returns.

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