This paper examines the safe-haven and hedging potential of oil and gold against industrial metals and agricultural commodities using a novel approach of quantile-on-quantile regression (QQR). For empirical analysis, we use the data on these commodities from January 2000 to December 2018, which further splits up into two sub-periods based on the global financial crisis (GFC). The results from the time-varying correlation of oil (gold) with metals and agriculture commodities suggest that oil (gold) has a lower correlation with metals and agriculture in the pre-GFC period than post-GFC. Further, the QQR model for two time periods (pre-GFC and post-GFC) was used to examine whether oil (gold) serves as a hedge (safe-haven) during the two periods. We conclude that oil was a safe-haven for metals and agricultural commodities pre-GFC but lost that ability post-GFC. Finally, we analyze the hedge ratio and hedge effectiveness pre- and post-GFC and confirm that oil had higher hedge effectiveness than gold during the pre-GFC period.
Bibliographical noteFunding Information:
Muhammad Abubakr Naeem gratefully acknowledges the support of the Science Foundation Ireland under grant number 16/SPP/3347 . Sang Hoon Kang acknowledges the financial support by the Ministry of Education of the Republic of Korea and the National Research Foundation of Korea ( NRF-2020S1A5B8103268 ).
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