Can gold be used as a hedge against the risks of Sharia-compliant securities? Application for Islamic portfolio management

Aktham Maghyereh; Basel Awartani; Abul Hassan

doi:10.1057/s41260-018-0090-y

Can gold be used as a hedge against the risks of Sharia-compliant securities? Application for Islamic portfolio management

Aktham Maghyereh, Basel Awartani, Abul Hassan

Research output: Contribution to journal › Article › peer-review

21 Citations (Scopus)

Abstract

In this paper, we investigate whether gold hedges Sharia-compliant stocks and Sukuk during the period from September 2005 to October 2017. The inference is taken by using both the DCC-GARCH model and the wavelet coherence analysis. On the whole, our finding suggests that gold is not effective in hedging the fluctuations of Sharia-compliant securities. However, we find that combining gold with stocks (and Sukuk) is useful in diversification and portfolio optimization. These results imply that, while gold is an excellent hedge for plain vanilla securities, it is not for Islamic exposures. This is important in light of the increasing amount of assets that are managed according to Islamic screening.

Original language	English
Pages (from-to)	394-412
Number of pages	19
Journal	Journal of Asset Management
Volume	19
Issue number	6
DOIs	https://doi.org/10.1057/s41260-018-0090-y
Publication status	Published - Oct 1 2018

Keywords

Gold
Hedge
Portfolio optimization
Sharia-compliant stocks
Sukuk
Wavelet coherence analysis

ASJC Scopus subject areas

Business and International Management
Strategy and Management
Information Systems and Management

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10.1057/s41260-018-0090-y

Cite this

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abstract = "In this paper, we investigate whether gold hedges Sharia-compliant stocks and Sukuk during the period from September 2005 to October 2017. The inference is taken by using both the DCC-GARCH model and the wavelet coherence analysis. On the whole, our finding suggests that gold is not effective in hedging the fluctuations of Sharia-compliant securities. However, we find that combining gold with stocks (and Sukuk) is useful in diversification and portfolio optimization. These results imply that, while gold is an excellent hedge for plain vanilla securities, it is not for Islamic exposures. This is important in light of the increasing amount of assets that are managed according to Islamic screening.",

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AU - Maghyereh, Aktham

AU - Awartani, Basel

AU - Hassan, Abul

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Y1 - 2018/10/1

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AB - In this paper, we investigate whether gold hedges Sharia-compliant stocks and Sukuk during the period from September 2005 to October 2017. The inference is taken by using both the DCC-GARCH model and the wavelet coherence analysis. On the whole, our finding suggests that gold is not effective in hedging the fluctuations of Sharia-compliant securities. However, we find that combining gold with stocks (and Sukuk) is useful in diversification and portfolio optimization. These results imply that, while gold is an excellent hedge for plain vanilla securities, it is not for Islamic exposures. This is important in light of the increasing amount of assets that are managed according to Islamic screening.

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Can gold be used as a hedge against the risks of Sharia-compliant securities? Application for Islamic portfolio management

Abstract

Keywords

ASJC Scopus subject areas

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