Abstract
The research investigates the safe-haven, hedging, and diversification function of crude oil for conventional currencies, among which five are major oil exporters, and six are major oil importers. In order to model time-varying dynamic correlations between crude oil and currencies, the study uses the Asymmetric-DCC model. The findings highlight low or negative correlations, especially during the crisis period. Next, we employ a quantile based regression framework and conclude distinct safe-haven and hedge functions of oil for major currencies. We provide additional evidence on the safe-haven, hedging, and diversification function of crude oil using the cross-quantilogram framework. The findings of out of sample analysis illustrate that the hedging effectiveness of oil is greater for oil-exporting countries. In addition, the conditional diversification benefit of oil is higher in the lower quantiles, i.e., when both foreign exchange and oil markets are in a bearish state. Finally, implications for investors, portfolio managers, and policymakers are further discussed.
Original language | English |
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Article number | 4354 |
Journal | Energies |
Volume | 13 |
Issue number | 17 |
DOIs | |
Publication status | Published - Sept 2020 |
Externally published | Yes |
Keywords
- Crude oil
- Currency
- Hedge
- Safe haven
ASJC Scopus subject areas
- Renewable Energy, Sustainability and the Environment
- Fuel Technology
- Energy Engineering and Power Technology
- Energy (miscellaneous)
- Control and Optimization
- Electrical and Electronic Engineering