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Assessing the hedging potential of gold and other precious metals against uncertainty due to epidemics and pandemics.
Sikiru, Abdulsalam Abidemi; Salisu, Afees A.
  • Sikiru AA; Research and Statistics Department, West African Monetary Agency, Freetown, Sierra Leone.
  • Salisu AA; Monetary Policy Department, Central Bank of Nigeria, Abuja, Nigeria.
Qual Quant ; 56(4): 2199-2214, 2022.
Article in English | MEDLINE | ID: covidwho-1959064
ABSTRACT
We assess the hedging capabilities of four prominent precious metals namely gold, palladium, platinum and silver against market risks due to epidemics and pandemics. The research objective is informed by the COVID-19 pandemic which amplifies health risks with attendant concerns for financial markets. We utilize the health-related uncertainty index developed by Baker et al. (Equity market volatility infectious disease tracker [INFECTDISEMVTRACK], 2020) which measures uncertainty in the financial markets due to infectious diseases including the COVID-19 pandemic and construct a predictive model that accommodates the salient features of both the predictand and predictor series. Our results support the safe haven property only for gold before and during the COVID-19 pandemic. We push the analysis further for in-sample and out-of-sample forecast evaluation and find that accounting for uncertainty due to infectious diseases improves the forecast of the four precious metals relative to the benchmark model (historical average). We highlight for investors that the gold market remains the safest market among the precious metals particularly during the COVID-19 pandemic.
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Full text: Available Collection: International databases Database: MEDLINE Type of study: Prognostic study Language: English Journal: Qual Quant Year: 2022 Document Type: Article Affiliation country: S11135-021-01214-7

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Full text: Available Collection: International databases Database: MEDLINE Type of study: Prognostic study Language: English Journal: Qual Quant Year: 2022 Document Type: Article Affiliation country: S11135-021-01214-7