Three essays on identifying safe havens for equity investors


Morley, Ciara (2013) Three essays on identifying safe havens for equity investors. PhD thesis, National University of Ireland Maynooth.

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Abstract

Chapter 2 examines conditional mean and volatility spillover between equity and gold to ascertain if gold is a safe haven for investors. This is achieved using a VAR-GARCH model allowing for simultaneous transmission of shocks between series. This also provides the time-varying inputs for portfolio construction to aid investors’ understanding of the interactions between gold and equity. Results reveal that statistically significant return and volatility spillover from equity to gold is nonexistent over a thirty-one year period. On the strength of these results gold is recommended as a safe haven for a well diversified portfolio. Chapter 3 determines how potential safe havens are affected by the arrival of negative shocks in the stock market. A test for mean and variance spillover from equity to potential safe haven assets is achieved using Cheung and Ng’s (1996) two-stage Cross-Correlation Function procedure. Next, information transmission is analysed between equity - gold and equity - 10-year bond based on Volatility Impulse Response Functions developed by Hafner and Herwartz (2006). Results indicate that both assets have the potential to be used as safe havens. However, gold proves slightly more attractive and as such should be chosen over a long-term U.S. Treasury bond. Chapter 4 presents the uniformed Markov-switching framework of Flavin and Panopoulou (2010) for a more in depth analysis of the relationship between the stock market and potential safe havens. The first test for shift-contagion identifies changes in the normal relationship between assets during periods of high-volatility, while the second test for pure-contagion provides insight into how a high-volatility equity idiosyncratic shock affects other assets. Results suggest that investors should proceed cautiously if simultaneously investing in equity and a 1-year bond.

Item Type: Thesis (PhD)
Keywords: identifying safe havens; equity investors;
Academic Unit: Faculty of Social Sciences > Economics, Finance and Accounting
Item ID: 4873
Depositing User: IR eTheses
Date Deposited: 08 Apr 2014 15:13
URI:

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