Hedging and safe haven assets dynamics in developed and developing markets: Are different markets that much different?

Abstract

Growing economic and geopolitical uncertainty drive investors' interest in identifying hedging and safe haven assets, as well as how their risk management properties may depend on the particular time period and the type of market. To expand and enhance existent literature on the subject, we study hedging and safe haven dynamics of oil, gold, silver, platinum and palladium against equities, bonds, and currencies in three major advanced economies and five emerging markets, over 1999 through mid-2021. We use DCC-GARCH to explore hedging properties and SVAR model to study safe haven potential. Our results show that risk management properties of these assets vary across developed and emerging markets and across different time periods associated with various systemic crises. Some of these variations enhance the findings of prior literature while other contradict previously identified relationships.